How is Blockchain used in accounting?
I’m putting together a massive financial professional round-up post. If you have just a few minutes to answer this question, it will provide some great exposure for you and your brand. Here is my query: How is Blockchain used in accounting?
Blockchain: A New Way To Think About Accounting
Blockchain accounting is the accounting technology that avails the transfer of asset ownership and maintaining financial transactions. It displays obligations and aims to excel the efficiency of the ongoing accounting process. The blockchain will surely consume most of the work aspects in the near future and will heavily impact the accounting industry.
How To Move Beyond Regular Accounting With Blockchain
1) Blockchain implementation for auditors
2) Looking for the triple- accounting era with blockchain technology
3) Smart contracts with blockchain
4) Blockchain helps in instant accounting transactions
5) Cost savings with blockchain technology
6) Blockchain reduces accounting fraud
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Humans have been ever evolving when it comes to currency. Right from our barter system to the modern form of cash and notes that we use today, the point is that we can buy whatever we want today without thinking about complexities involved that were earlier existing in the barter system.
While all these currencies are extremely tangible, we also process payments and make exchanges virtually. It means that while cash and coins are something you can keep, there are other forms of currencies that you cannot directly keep. You might have got a list of it that we are talking about cards right now.
The Complexities of Common Payments
Cards are in fact one of the most valuable forms of currency right now and have been able to get us anywhere and buy anything. Obviously that depends on how much money we have in our bank account, but nonetheless, you don’t need to carry truckloads of it, if you are eyeing something expensive.
The point is that money seems so seamless when you don’t physically see it. You are able to do more than a few things on your own and go on making purchases and transactions wherever you like.
While you can count the currency notes and coins physically when you have them, you don’t do any such things with cards. For a person, this means that when you purchase anything, the details of the purchase are stored as transactions in your bank account. No physical money gets transferred anywhere.
The same transaction is processed at the person’s end from whom you are purchasing anything. So, the question is, when you purchase everything without the constraints of physical money, how does the transfer take place?
The answer is simple, Money gets transferred electronically. The financial organizations such as banks etc. make changes to the figures in your account and in the service provider’s account to reflect a transaction. The same is conveyed to you via a notification such as an SMS or email.
When we talk of an electronic change, it simply refers to a change made using a computer algorithm. For example, when you purchase a car that is worth $1000, you pay using a card. The retailer takes your card, swipes it in his machine, and voila! You’re free to take your car to your home.
While the entire experience sounds amazing, the background processes are complex behind it. As the retailer swipes the card in the machine, you are supposed to enter the pin in your machine. This pin is a sign of validation that helps in establishing the authenticity of the transaction.
Once you enter the pin, the information is verified by the financial institution that is the fundamental caretaker of your money. In other words, it is the bank that quickly verifies your pin and decides whether to process a transaction or not.
After your pin gets verified, the algorithm makes changes to the figures in your bank account and that of the car retailer’s. Therefore, while you receive an SMS of a debit of $1000, the car retailer gets a notification of credit of $1000.
Similarly, even cardless payments exist and have been popularized by the audiences across the world. One of the most common forms of payments is internet banking. The form of currency is digital but a user doesn’t get to carry a card or cash to make a transaction for it. Usually, internet banking is extensively used for payments made in eCommerce.
However, another form of currency is taking over which is completely digital in its entirety. Known as bitcoin, the currency came into existence only in 2009 and has been one of the most talked-about currencies in the world.
One of the best advantages of using Bitcoin is that there are no middlemen involved as we talk of payments. If you’re wondering what middlemen exist in usual currencies, it is the bank. Bitcoins can be used without having to get a verification of banks. And that’s because bitcoin currencies aren’t stored in the bank.
They can be used to book hotels on Expedia and buy games for your Xbox, but most of their hype comes because of its trading capability. So, what does it mean to process a transaction without any bank in the middle? Let’s understand it this way- when you process a payment via modes like cards and internet banking or any java development India secure payment, you need to verify a pin at the end of the bank. And that is because the bank is storing your money, so all of our transactions will be tracked.
On the other hand, when you’re using bitcoin, you are completely anonymous in terms of transactions. While regular payments are tied to international regulations, bitcoins are the most free form of currency. Having said that it is presenting a lot of opportunities for people interested in trading. We’ve come a long way in evolving currencies, and while every other currency is tied to a middleman called a bank, bitcoin offers complete flexibility across borders.
The article first published on Tech Behind It having source URL - Evolving To Bitcoin: How Will Currency Change in The Future?
Blockchain is an accounting technology. It is concerned with the transfer of ownership of assets, and maintaining a ledger of accurate financial information. The accounting profession is broadly concerned with the measurement and communication of financial information, and the analysis of said information. Much of the profession is concerned with ascertaining or measuring rights and obligations over property, or planning how to best allocate financial resources. For accountants, using blockchain provides clarity over ownership of assets and existence of obligations, and could dramatically improve efficiency.
Accountants will not need to be engineers with detailed knowledge of how blockchain works. But they will need to know how to advise on blockchain adoption and consider the impact of blockchain on their businesses and clients.They also need to be able to act as the bridge, having informed conversations with both technologists and business stakeholders.
The blockchain technology has the potential to shapeshift the nature of today’s accounting.
Blockchain is the golden gift of technology that helps the accounting industry in decreasing costs of reconciliation and maintenance of ledger records; it helps accountants have a history of almost all the information of assets. The technology also allows accountants to get clarity about the available resources and obligations of their businesses.
Blockchain can help reduce bookkeeping and reconciliation workload while adding value to other areas.
Blockchain's impact on the accounting industry:
• It reduces auditing effort as auditors can automate most of their functions
• Reduces the risk of fraud
• Improves regulatory compliance and offers high data security
• Reconciliation becomes easy as accountants can start using smart tools to automate reconciliation tasks
• Enhances efficiency; blockchain offers a faster and more robust database.
Hope it helps!
there are so many new ICO which are coming.
I am sure one will come up as winner and with true solution
When Bitcoin, the famous cryptocurrency, burst onto the scene, it promised everything that the current payment systems were incapable of. It was decentralized, open source, and highly secure - allowing payments and transfers to be made in seconds, and doing so at a fraction of the cost of the traditional banking systems.
A lot of people, however, were more interested in Blockchain - The technology underlying the Bitcoin.
Blockchain is a distributed, decentralised database technology that maintains a growing list of transactions and, through encryption and other activity, verifies their authenticity.
Essentially it means that the Blockchain can act as an immutable record of ownership and this is of massive relevance.
Accounting is concerned with recording the economic transactions of an entity in a manner compliant with the accounting standards. These records are then shared with stakeholders like the investors, governments, banks etc. This created the problem of how these stakeholders could trust the company’s books.
Thus came the independent public auditor, whose role was (and is) to serve as an independent guarantor of financial information. Stakeholders placed their trust not in a firm’s management, who had a vested interest in presenting the rosiest of pictures to all who cared to ask, but in the auditors retained by management to vouch for them.
This arrangement unfortunately creates the problem of agency. Do auditors work for the managers who hire and pay them or for the public that relies on their integrity in order to make decisions? Though there are rules governing this, the accounting scandals that occurred in the last 15 years, prove that the picture is not as rosy as it seems.
The Blockchain can help in this. Since altering the transactions/blocks in blockchain is nearly impossible, Using the Blockchain makes it possible to prove integrity of electronic files easily. One approach is to generate a hash string of the supporting evidences like Invoices. That hash string represents the digital fingerprint of that file. Next, that fingerprint is immutably timestamped by writing it into the Blockchain via a transaction. At any subsequent point in time, one can prove the integrity of that file by again generating the fingerprint and comparing it with the fingerprint stored in the Blockchain. In case the fingerprints are identical, the document remained unaltered since first writing the hash to the Blockchain.
The companies would benefit in many ways : Standardisation would allow auditors to verify a large portion of the most important data behind the financial statements automatically. The cost and time necessary to conduct an audit would decline considerably. Auditors could spend freed up time on areas they can add more value, e.g. on very complex transactions or on internal control mechanisms.
Therefore, we can see that the Blockchain has the potential to really disrupt the accounting function and the way auditing is done.
Hope this helps.
Blockchain is also known as distributed ledger technology (DLT), a digital system that records asset transactions and their details in multiple locations simultaneously. Blockchains are building blocks of interactions and transfers. These blocks can be assets of any digital kind, for example, money, securities, land titles, information on identity, health and other personal data.
Traditional accounting maintains and stores records in a centralised location, typically in the database of an accounting software application. This model is based on a double-entry accounting system, which has been around for centuries. An accountant will enter all records into the system and perform all necessary changes. When information is needed by a client or regulator, the accountant will retrieve the data – only the accountant and auditor have direct access to the centralised ledger.
However, blockchain is accessible to all relevant parties by employing a triple-entry bookkeeping model. This means all stakeholders – accountant, auditor, client, regulator – will have an identical copy of the ledger at all times, shared across a peer-to-peer network of nodes (computers) spread across multiple sites