{"id":11540,"date":"2018-09-10T12:33:25","date_gmt":"2018-09-10T10:33:25","guid":{"rendered":"https:\/\/www.invoiceberry.com\/blog\/?p=11540"},"modified":"2024-08-12T13:10:17","modified_gmt":"2024-08-12T11:10:17","slug":"blockchain-technology-evolving-conventional-accounting-systems","status":"publish","type":"post","link":"https:\/\/www.invoiceberry.com\/blog\/blockchain-technology-evolving-conventional-accounting-systems\/","title":{"rendered":"Blockchain Technology is Evolving Conventional Accounting Systems"},"content":{"rendered":"

What comes to your mind when you hear the term \u201cblockchain technology?\u201d Your mind probably takes you to the context of Bitcoins, Etherium, Litecoins, among other cryptocurrencies. That\u2019s expected. It\u2019s the <\/span>explosion in the use of cryptocurrencies<\/span><\/a> that has brought blockchain into the mainstream. But, that\u2019s just one of its uses – authenticating new digital currencies. In reality, cryptocurrency hasn’t even begun scratching the surface<\/a> of the potential blockchain technology has in disrupting conventional business systems. <\/span><\/p>\n

Blockchain technology versus accounting systems<\/b><\/h2>\n

When it comes to conventional accounting, all records are stored in a centralized location. This can be a database of an accounting software application or a collection of spreadsheet files. The accountant must retrieve all information they need from that location to perform whatever action is needed to serve their clients. Although one issue arises – only the auditors and accountants can directly access the centralized ledger.<\/span><\/p>\n

\"Blockchain<\/p>\n

Blockchain technology on the other hand, stores all the records in a shared or distributed ledger which can be accessed by all concerned parties. That way, auditors, regulators, accountants and clients would have an identical copy of the ledger at all times. Each would have access to the portion of ledger that contains their records with the use of private and public keys to authenticate users. <\/span><\/p>\n

This breakthrough provides the advantages of immutability and transparency that\u2019s very critical when it comes to the integrity of records of an accounting firm. Besides, by using <\/span>smart contracts<\/span><\/a>, the technology implements the governing rules that authorize different entities to access financial records. Because of these strengths, accounting experts believe blockchain accounting will ascend the bookkeeping industry to new heights. <\/span><\/p>\n

Big names in the accounting industry are embracing this technology<\/b><\/h2>\n

\"Blockchain<\/p>\n

There is a huge reason behind this adaptation. It\u2019s all about the value. Comparing the internet and blockchain technology, the chairman of Wall Street Blockchain Alliance once <\/span>said<\/span><\/a> that \u201cinternet gave us a powerful ways to share and access information\u201d but, the emerging blockchain technology \u201cnow gives us a powerful way to share and access value.\u201d<\/span><\/p>\n

Today, big accounting firms \u2013 Ernst &Young, KPMG, Delloitte and PricewaterhouseCoopers \u2013 are leading the way, especially in regards to blockchain research for accounting practices. Ernst & Young and PricewaterhouseCoopers are accepting Bitcoin<\/a> as a method of payment while others like Delloitte ad KPMG have already appointed blockchain directors to steer them to the path of adopting cryptos in their business. <\/span><\/p>\n

In a bid to investigate blockchain application in accounting system, KPMG launched a program dubbed ‘Digital Ledger Services’<\/a>. That was in 2016. \u00a0The company also partnered with Microsoft in 2010 to create the \u201cBlockchain Nodes<\/a>\u201d, an initiative that was aimed at identifying new applications and how blockchain technology might find more uses in the accounting industry.<\/span><\/p>\n

Deloitte, on the other hand launched Rubix<\/a> \u2013 a \u201cone-stop blockchain software platform.\u201d Since then, the company has continued to expand and diversify their offerings. They also seek to explore initial coin offerings (ICOs). Besides, their partnership with “Waves Platform” means, among other things, that crypto-trading and ICOs are becoming more accessible and reliable than before.<\/span><\/p>\n

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Well, it might appear like we have managed to cover all the bases in the name of blockchain; the the truth is, we are just at the beginning of the process. Today, an increasing number of mainstream companies are now accepting <\/span>Bitcoin<\/span><\/a>\u00a0for payment,\u00a0including\u00a0Shopfy, Microsoft, Expedia, Newegg.com, Reddit, eGifter, and dozens of others. As more companies embrace the use cryptocurrency economy, accountants and auditors will be forced to include cryptocurrencies transactions in their accounting processes. <\/span><\/p>\n

Should auditors and accountants be concerned or excited? <\/b><\/h2>\n

Should accounting professionals look for a new line of work? As with any revolutionary technology, there is always the fear of whether it will be blessing or a curse to the adopters and anyone else involved. <\/span><\/p>\n

Luckily, most forecasters don\u2019t see the technology edging out accountant professionals form their jobs.<\/span> Jeremias Ramos<\/span>,<\/span><\/a> a CPA says that <\/span>\u201c<\/span>blockchain \u2026will significantly reduce the cost of bookkeeping \u2026 but will not eliminate the need for accountants altogether.\u201d<\/span><\/p>\n

Why? Jeremiah says that while blockchain technology is \u201cgood at verifying financial information\u201d it might not work well at ensuring that \u201ca financial statement is appropriately represented using Generally Accepted Accounting Principles.\u201d Failure to represent financial statements appropriately might lead to fraud.<\/span><\/p>\n

So what\u2019s really happening? <\/b><\/h2>\n

Erik Asgeirsson, president and CEO of CPA.com, believes that blockchain is just going through the process of evolution within the accounting field. In an <\/span>article<\/span><\/a> published by “The Journal of Accountancy,’ he says that “the roles of the auditor and the accountant have transformed”.<\/span><\/p>\n

\"\"<\/p>\n

So, at the end of the day, it all depends on how prepared they are to embrace the technology. This doesn\u2019t necessarily mean that early adopters will reap big rewards from the technology. Although those that adopt distributed ledger technology<\/a> (DLT) as part of their business model in the next year, will enjoy its benefits sooner. That means auditors and accountants need to learn as much they can about the new technology before it becomes an integral part of their jobs. <\/span><\/p>\n

What about the cost ramifications?<\/b><\/h2>\n

There are a lot of advantages of DLT in the accounting industry, though that doesn\u2019t mean that there won’t be any casualties or challenges when adopting the technology.<\/span><\/p>\n