Blockchain makes a decentralized record of all exchanges where all records are upgraded and open to everybody in real-time. It records and verifies transactions without any trusted central authority. The technology itself exists as a file that maintains a continuously growing list of ordered records called blocks. Each block contains a timestamp and a link to a previous block using a “fingerprint”. Blockchains are resistant to modification of data and cannot be altered retroactively.
Here are some key points to consider about the impact blockchain technology will have on the future of accounting.
Smart Contracts
With the security of blockchain technology, smart contracts that automatically process invoices, bank balances, and other accounts are also made possible with absolute transparency.
Consolidated Bookkeeping
Rather than keeping multiple records, companies can log off their transactions into a joint registry.
Standardization in Auditing
Since blockchain creates absolute standardization in the accounting practice, auditors will be able to verify larger amounts of data much faster. Conducting audit would also be much cheaper and easier.
Security and Trust
In blockchain, every transaction is recorded as a block that contains in timestamp and a unique fingerprint. Hacking an entire blockchain means hijacking all the computers connected to the ledger network. This makes it the most secure data management system ever to be conceived.
Less Paperwork for Accountants
In theory, blockchain will reduce or eliminate the dependency on paperwork in the future. For example, since the government can theoretically peek into a public ledger at any time. Companies no longer need to file tax returns. Everyone will be automatically taxed accordingly.