Blockchain Technology in Accounting: A Comprehensive Analysis

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RIMI JMD2808 ICT
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Contents
Question B.......................................................................................................................................3
Concept of Blockchain technology..............................................................................................3
How does BlockChain work........................................................................................................3
How the technique is helpful for the accountants........................................................................4
Problems included in blockchain technology..............................................................................5
References........................................................................................................................................6
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Question B
Concept of Blockchain technology
The blockchain is a principled digital ledger which provides economic transactions which can be
automatic to record not only the financial transactions but also provide the value. A BlockChain
does not involve any kind of transactional cost. It is a simple way of passing the information
from person A to person B in a well-organized manner. By using the blockchain technology the
information can be transfer in a safe manner. One party to a transaction begins the process by
developing a block. The block can be verified by thousands or millions of computer networks
distributors around the net. This verifies block can be added into a chain which is amassed across
the net, developing not just an exclusive record but the unique record with a unique history. A
fake record can destroy the whole chain of this technology (Wright and Filippi, 2015). This is
almost impossible. The model can be used for monetary transactions but it can be organized in
many other ways. The example can be taken as the railway organization. When a consumer buys
a ticket by using an app or web the credit card organization charges some amount for the
transaction. With the help of Blockchain technology not only the railway, the operator saves the
processing fees of a credit card but they can also move the overall ticketing process to the
blockchain. There are two parties involved in this kind of transaction one is Railway Company
and the second is a passenger. The ticket can be counted as a block that will be added to the
ticket blockchain. The blockchain technology can provide a monitory transaction and the
outcomes could be verifiable and not fake. The blockchain technology not only can store and
transfer the money but also can replace the entire process and models of business which use to
charge a small amount of money while making a transaction. The recent entrance like AirBnB
and Uber are affected by blockchain technologies. The transactions of blockchain technology are
complementary (Atzori, 2015).
How does BlockChain work
The spreadsheets can be duplicated by using a computer or network. The blockchain technology
can regularly update that kind of spreadsheets. The information detained on a blockchain shares
a continuously reconciled database. The database related to blockchain technology could not be
stored in a particular location or area but their records could be seen by the population as those
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data are truly public and easily confirmable. There is not any centralized version of this kind of
information which can be used by any kind of hackers. There are no chances of corruption. The
data can become accessible for all the people who are using internet facilities. There are certain
reasons for blockchain has increased so much appreciation and those are that it cannot be owned
by a single entity because it is a decentralized process. The blockchain technology is immutable
so, no one can fiddle with the data which is involved in the blockchain (Mainelli and Smith,
2015).
How the technique is helpful for the accountants
The blockchain technology has the potential to further improvement of the accounting industry
by decreasing the amount of maintaining and reconciling ledgers and providing complete
confidence on the ownerships and history of assets. Companies can write down their transactions
unswervingly into a joint register, developing an interlock system for continuing the records of
accounting. This technique will help them and there will be no need of keeping the separate
records of transactions. The blockchain technology provides the following benefits in the current
accounting process:
 Decreasing errors: It is one of the best advantages of using the blockchain technology.
The technology is so much concerned with not to make any kind of errors. Once the user
puts the data in chain, smart contracts will develop any kind of functions that can
automatically reduce the human errors.
 Enlarging efficiency: blockchain is a rapid and powerful database. By using the
blockchain technology getting data into and out of the system can be done more
efficiently.
 Reduces cost: The blockchain technology increases the level of efficiency and reduces
an error which becomes a cause of reduced cost. By following the original acceptance
cost, the accounting firms can expect to see a quick cost saving over conservative
accounting system.
 Reduces frauds: The unchallengeable nature of this technique makes it tremendously
difficult to manipulate. For modify a particular track or record the same changes will
have to be made in all the copies of the distributed ledger at the same time and this is
hugely infeasible (Crosby, et. al., 2016).
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Problems included in blockchain technology
As technology is providing so many benefits to the current accounting system but there are some
problems which are involved with the blockchain technology system and here is the description
of those problems:
 Waste of resources: The blockchain technology is based upon distributed nature of
architecture and its every node has to be behind blockchain to have agreement among all
the nodes. At some points, the repetition of task can make duplication in the calculation
of needs, storage, and wastage of some natural resources like electricity.
 Human error can lead the lots of trusts: If the blockchain is being used as the database
then it becomes important to keep that data high quality. The database stored by
blockchain is not can be trustworthy so, it is important to record the different events and
circumstances importantly.
 Network speed: The multiplication happens between the nodes the speed can become
slower and the backlogs can start developing at the nodes included in the networks.
 Complexity: The blockchain technology includes a new vocabulary. It made the
cryptography more conventional. The highly specialized industry is chock-full of jargon.
There is various kind of efforts that are providing glossaries and directories which are
easy to understand and accessible for the users of blockchain technology (Crosby, et. al.,
2017).
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References
Atzori, M., 2015. Blockchain technology and decentralized governance: Is the state still
necessary?. Available at SSRN 2709713.
Crosby, M., Pattanayak, P., Verma, S., and Kalyanaraman, V., 2016. Blockchain technology:
Beyond bitcoin. Applied Innovation, 2(6-10), p.71.
Crosby, Z., Xie, S., Dai, H., Chen, X. and Wang, H., 2017, June. An overview of blockchain
technology: Architecture, consensus, and future trends. In 2017 IEEE International Congress on
Big Data (BigData Congress) (pp. 557-564). IEEE.
Mainelli, M. and Smith, M., 2015. Sharing ledgers for sharing economies: an exploration of
mutual distributed ledgers (aka blockchain technology). Journal of Financial Perspectives, 3(3).
Wright, A. and De Filippi, P., 2015. Decentralized blockchain technology and the rise of lex
cryptographic. Available at SSRN 2580664.
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