In the modern era, the use of blockchain technology is taking place at a faster pace. Further, it is considered to be one of the simplest way through which information can be passed easily. No such transaction cost is present in this type of technology (Dai and Vasarhelyi, 2017). Blockchain as the name suggests it undertakes the different blocks that work together with each other. Four things are major that must happen for a block like transaction must take place, it must be verified, stored in a block and at last block must be given a particular hash also that is very crucial.
The present study carried out is based on the use of blockchain technology in the field of accounting. The different phases of this type of technology have been discussed in the report along with the use of this technology in the field of accounting. These areas have been covered in the research. Here, the article presented by Dai and Vasarhelyi has been taken into account with an objective to carry out study on blockchain technology and its importance in accounting.
Blockchain technology is considered to be highly advanced and in turn its different stages are considered to be highly crucial also.
It has been indentified that the concept of blockchain has further divided into three major phases which are blockchain 1.0, blockchain 2.0 and blockchain 3.0 (Smith, 2018). Furthermore, the phase which is blockchain 1.0 emphasized on trading of crypto currency and it included different functions which are remittance, digital money transfer and different modes of payment. On the other hand, the second phase of blockchain 2.0 focuses on trading of same nature but the difference here is that it includes a broader scope associated with various applications linked with finances (Kokina, et al. 2017).
The last phase of blockchain is 3.0 and it is linked with the continuous development of the web. It is expected that web 3.0 can deliver machine learning, data mining, natural language etc that are totally different from each other. Hence, in this way these are the some of the three different phases of the blockchain technology that differs from each other in terms of development.
In the field of accounting, the blockchain technology is highly useful. This technology is directly associated with transfer of the ownership of assets, maintaining ledger and at the same time passing on correct financial information that is also very important (Schmitz and Leoni, 2019). Mainly, in the modern era accountants are using this technology as it provides clarity regarding the ownership of the assets and at the same time business efficiency can be easily improved with the help of this. It becomes quite possible for the accountants to obtain clarity regarding the resources available along with the obligation of the firm. According to the research conducted by Dai & Vasarhelyi, (2017), the use of blockchain technology can be very useful and effective because the technology provides an opportunity to carry out accounting in real time. The businesses and organisations also gets the opportunity to carry out voluntary disclosure of their financial performance with the help of blockchain technology. Moreover, accountants can easily know the resources that are free and they can focus on valuation along with the planning also. In short, the rapid use of blockchain technology in the field of accounting has contributed in more transactional level accounting. Through the elimination of reconciliations, it is quite possible that blockchain technology can enhance the scope of accounting (Watson, 2017).
Overall the blockchain technology has high level of potential as it has contributed a lot in reducing the cost linked with reconciling and maintaining ledger. Companies can easily write their transactions in the joint register In short, without the assistance of this technology the overall development of accounting industry is not possible and at the same time it can bring unfavorable results also (Shyshkova, 2018). In terms of accounting, blockchain technology is also useful because it can help in providing access to the accurate financial information to the parties and stakeholders. Hence, this is the actual effectiveness of the blockchain technology in the field of accounting and it has brought favorable results also on the long run basis that is most crucial.
Triple entry accounting (TEA) is the increasing version of the double-entry bookkeeping system. In this accounting method records and data are stored in the form of journal third entries but in the decoded way. This technique is providing organization data security and safety. As per the views of Dai & Vasarhelyi, (2017) the increasing number of frauds and errors in the single entry system of accounting has resulted in the development of triple entry system of accounting. Furthermore, it has also been explained that the primary objective behind the introduction of Triple entry system of accounting was to enhance the reliability of companies’ financial statements and performance. These entries are related to the third party transaction activity. Further, this is including following parties transaction such as the purchase of raw material, delivery of finished goods, tax payments and outstanding expenses (Fanning and Centers, 2016). The company can follow the regular accounting system with TEA techniques. The motive of applying TEA tools is to get accurate financial results. This is the modern financial accounting technique that can also say as a contra entry system. In this process, all the assets of the organization set on a single side and the trading activity transaction effect put on the other side. In the triple entry accounting system, blockchain technology can be used with an objective to deal with issues such as cyber attacks and crimes. In that column the asset source and both parties record and their liabilities are mentioned. For example, the company earns the revenue from a particular source that affects the revenues in a particular time period with a fixed growth rate. In this condition, the firm needs three financial entries compulsory when they are applying the TEA (Tapscott and Tapscott, 2017).
TEA is based on the double-entry system so the agenda of introducing in the triple entry financial system to remove the error and drawback of the double-entry bookkeeping system. Currently, there is much software that provides the TEA system facility in that they provide various data information about a transaction in a numerous way. In the advance triple entry bookkeeping system, another component is added in the digital coded form to provide the security to the records. The blockchain technology can also play a critical role of intermediary in the triple entry accounting system by offering a secured and most relevant foundation.
This TEA provides the platform to the company in that they can choose the transaction option through a common contract, and the contract includes all the information of whole transaction (Byström, 2019). The contract is made in a digital form that would be operated by only the buyer and seller. The benefit of the TEA is creating transparency in the accounting system for future activities. It is a rechecking of balance and permanent proof for both the parties. This system creates a fraud chance in the financial books of account because it is based on digital format. The use of blockchain technology in TEA can also be very useful and effective as it can contribute a lot in carrying out rapid and accurate verification of the accounting transactions conducted.
Some key challenges are also associated with the blockchain technology in the field of accounting that accountants are required to be undertaken. One of the main problems that has been identified is that accounting software is not at all compatible with the blockchain technology (Martin, 2018). In case if any business organization is planning to put the accounting firm on the blockchain then in such case record keeping software may not allow to do so. So, this is the technical impact of the blockchain technology on the accounting as one of the area.
On the other hand, non technical impact is also present that is also required to be undertaken. The main issue is that accounting firms have to wait for longer time period to embrace the DLT technology. At the same time blockchain solutions for the entire accounting industry are not at all available and this can be considered as the main issue.
In short, the direct challenge is that accountants’ jobs have been replaced by the blockchain technology (Karajovic, et al. 2019). It has been identified that blockchain will disrupt accounting and at the same time it will affect auditing also. Further, all the transactions will be recorded in the immutable public ledger. In order to operate easily with the technology it is necessary for the accountants to develop the IT skills as through this it will be possible to work with the blockchain technology easily and in a proper manner also (Coyne and McMickle, 2017). According to the research carried out by Dai & Vasarhelyi (2017), it has also been identified that the scope of the participation in the blockchain is one of the most common issue which has been faced. It has been agreed that the calculation and consideration of participant’s scope is a critical issue. Moreover, some of the systems within the firm are not up to the mark or accurate and in this case challenges have to be faced while adopting the blockchain technology in a proper manner.
Hence, from the analysis it can be concluded that the phases of blockchain technology identified are highly advanced. The last phase of generation three and into the future contains some unique attributes. Along with this, in the field of accounting blockchain technology is highly useful and at the same time it has assisted accountants to carry out the transactions easily. Moreover, they have to apply lesser efforts in the accounting operations. The triple entry accounting allows digital record between buyer and seller and it avoids fraud also. The key challenge associated with blockchain technology is that accounting software is not compatible with this technology.
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