Blockchain – A Game Changer in Accountancy

Apr
03

Blockchain – A Game Changer in Accountancy

Article by
Pankaj Gupta,CTO
ANGLEPaisa

This article is too provide serene view on statements flooding on internet about block chain and
accountancy like
Blockchain is an accounting technology,
Blockchain an opportunity for accountants,
Blockchain technology a game-changer in accounting,
Blockchain future on accountancy,
Blockchain provides clarity over ownership of assets,
Blockchain has the potential to enhance the accounting profession,
Blockchain free up resources to concentrate on planning and valuation rather than recordkeeping
and so on…
What is blockchain? – A digital ledger in which transactions made in bitcoin or another
cryptocurrency are recorded chronologically and publicly.
In more generic words – blockchain is a continuously growing list of records, called blocks, which are
linked and secured using cryptography.
If we go in more technicality – blockchain is a decentralized, distributed and public digital ledger that is
used to record transactions across many computers so that the record cannot be altered retroactively as
well as allows the participants to verify and audit transactions inexpensively
Today’s Accounting – Accounting relies on mutual control mechanisms, checks and balances
but question is why it is so? and answer is that basic thumb rule of accounting, is that forgery should be
impossible or at least very costly as well as there is exceptionally high regulatory requirements in respect
to validity and integrity thus we need control, checks and balances.
This control-check- balance affects every day’s operations. Among other things, there are systematic
duplication of efforts, extensive documentations and periodical controls and top of that most of them are
manual, labor-intensive tasks.
Digitalization of the accounting system is still in its infancy compared to other industries, some of which
have been massively disrupted by the advances of technology. Accounting is far from being automated
the manual controls.

How blockchain may enhance today’s accounting – Modern financial accounting
is based on a double entry system again solved the problem of control-check- balance and increase the
trust of managers on their own books. Double entry system helps in internal trust however, to gain the
trust of outsiders, independent public auditors also verify the company’s financial information. Audit
system is time extensive and costly exercise.

Blockchain technology may represent the next step for accounting, instead of keeping separate records
based on transaction receipts; companies can write their transactions directly into a joint register, creating
an interlocking system of enduring accounting records. Since all entries are distributed and
cryptographically sealed, chances of tweaking them or destroying them is practically impossible. It is
similar to the transaction being verified by a notary – only in an electronic way.
How blockchain benefits companies – The companies would benefit in many ways:
Standardization 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.
Conclusion – The recently emerged blockchain is a trustless, distributed ledger that is openly
available and has negligible costs of use. The use of the blockchain for accounting use-cases is hugely
promising. From simplifying the compliance with regulatory requirements to enhancing the prevalent,
double entry bookkeeping.
The blockchain technology has the potential to shapeshift the nature of today’s accounting. It may
constitute a way to vastly automate accounting processes in compliance with the regulatory requirements.
As described above, there are numerous starting points to leverage blockchain technology. A cascade of
new applications will likely follow that are built on top of each other, leading way for new, unprecedented
services.

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