What is Blockchain Accounting – Roles & Benefits

Amaey Anand

Senior Writer

Blockchain Accounting

Blockchain accounting is becoming increasingly popular, and 55% of organizations have listed it as a top strategic priority. The integration of blockchain and accounting is revolutionizing the accounting industry to a great extent. But blockchain is not just limited to accounting.

A better understanding of blockchain technology is necessary to understand blockchain accounting properly. Let’s have a quick overview of blockchain technology.

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What Is Blockchain?

Blockchain, popularly known as DLT (Distributed Ledger Technology), is a robust and tamperproof technology that leverages cryptographic hash functions and a decentralized ledger for storing financial records safely and securely. Blockchain is a shared database that does not require any centralized ownership. 

Gone are the days when the scope of Blockchain technology was limited only to Bitcoin (also known as cryptocurrencies). Nowadays, banks, marketing agencies, educational institutions, real estate firms, financial institutions, healthcare sectors, and industries that need to store huge volumes of data are counting significantly on Blockchain technology to keep pace with digital transformation.

Since Blockchain technology can potentially disrupt businesses across industries, the scope of Blockchain is growing worldwide by leaps and bounds. The accounting industry is also reaping the benefits of Blockchain technology because of its reliability and open-source attributes. This post will shed light on a few practical applications and uses of Blockchain in accounting.

Also, Read :The Benefits of Accounting Software For Business Owners

What is Blockchain Accounting?

Blockchain is a pretty isolated technology; not many people understand the concept. But there is no denying that its penetration is increasing in most industries. However, blockchain technology has immense potential. It can modify any process by making it more secure and advanced.

Speaking of the accounting profession, blockchain technology in accounting has gained immense popularity. It can be used to record and manage almost every financial transaction in a protected and effective manner. The blockchain accounting system  is gaining a strong stance as many large accounting firms have initiated educating employees on blockchain technology.

The fundamental workflow structure of the blockchain accounting system is that financial transactions are first recorded in blocks sequentially and added into a chain of blocks. Blockchain accounting system entails decentralization, transparency, immutability, self-executing contracts, etc., that will greatly assist accounting professionals.

All in all, blockchain accounting can immensely elevate the accuracy, efficiency, and security of financial transactions with the assistance of a highly secure blockchain framework. Ledgers can be prepared in a highly transparent manner, and no one can tamper with the transactions once they are recorded.

Role Of Blockchain In Accounting And Its Impact On The Audit Profession

Blockchain accounting is revolutionizing the accounting sector by leaps and bounds. The role of blockchain technology in accounting is vast and significant, as the main benefit is the simplification of the transaction recording system. In addition, triple-entry bookkeeping is feasible in the blockchain, enhancing scalability and security.

It operates on advanced algorithms that ensure accuracy in the bookkeeping process. It also automates the process, which streamlines the data entry process and considerably reduces errors.

Moreover, the transparency aspect in the process is elevated with the introduction of blockchain technology in accounting, as the transaction, once recorded, cannot be altered at any cost.

It can be easily integrated with other tools to optimize the process. With this feature, the workforce can gain operational efficiency to a great extent. Integrating blockchain and accounting can benefit the organization as the secure blockchain technology framework makes it extremely reliable.

This is why accounting firms are increasingly embracing Blockchain accounting with open arms. Blockchain technology in accounting has been specially designed to help you manage and track your accounting firm’s ledgers in a highly secure manner. It also adheres to transparency for managing your accounting data. 

Blockchain is predicted to eliminate the need for an auditor to review financial statements. Yet, despite the blockchain’s immutability, the audit process demands a determination that the transaction recorded must be backed by reliable evidence. This could not be precisely determined by looking at the blockchain’s transactions.

Apart from that, there can be many reasons, like legality issues, unauthorized transactions, etc., why transactions recorded on blockchain can be flawed or unreliable.

So, there will be a positive impact, as the process will be eased up. But still, auditors need to stay aware and cope with the accounting policies regularly to hone their skills constantly.

How Does Blockchain In Accounting Work?

In its simplest form, blockchain accounting creates a safe, comprehensive, and decentralized journal for financial transactions. Below are a few steps containing the workflow of blockchain accounting:

Steps of blockchain accounting

  1. Initiating Transaction

    The first and most important stage in blockchain accounting  is a transaction, such as a sale or purchase of any given thing, such as a product or service, initiated by a party.

  2. Verification

    After a transaction is started, several people in the blockchain network verify it. The verification process can only be carried out by parties to the transaction or other reliable third parties.

  3. Recording

    Following verification, the transaction is added as a block to the blockchain accounting ledger. It also includes the verifier’s digital signature to guarantee the transaction’s legitimacy.

  4. Validation

    The nodes in the blockchain accounting system validate the block in which the transaction is recorded, ensuring the precision of the transaction. The technology also ensures that an exact copy of the ledger is present on every node in the network.

  5. Accumulation

    The block is added to the blockchain accounting system chronologically when validation is complete. Every block entails reference to the previous block, making a chain of blocks that cannot be altered or tampered with.

  6. Executing Smart Contracts

    This step automates the execution of a transaction depending on pre-established criteria, such as the receipt of payment or the delivery of products. As a result, duplicate entries are less likely to occur, and the procedure will be streamlined.

  7. Observability

    Transactions can be monitored and verified in real time by parties in the blockchain network. Transparency will increase, and auditing recorded transactions will be simple.

    Ultimately, by following the above-mentioned steps, blockchain accounting becomes highly effective as the processes are infused with advanced transparency and security features that blockchain technology possesses.

What Are The Benefits Of Blockchain Accounting For Businesses?

Blockchain accounting is extremely useful for every kind of business, whether large or small. With blockchain accounting, organizations can effectively execute the double entry system for recording accounting transactions.

All recorded entries can be evaluated with the corresponding and reference entries in the blocks. As a result, the management of accounts gets accurate and highly secure.

The following are the benefits of blockchain accounting:

Benefits Of Blockchain Accounting

  1. One Ledger System

    Every employee in the accounts department can be given access to enter transactions directly into the blockchain accounting ledger. It is also possible to record entries offline and update them later.

    As the blockchain accounting system relies on a distributed ledger, there are no restrictions regarding who can view the entries. Also, the decentralized format is beneficial in such a situation, as all the information is available on a single platform rather than in different databases.

  2. Automated Administration

    Setting control level in the blockchain accounting system is crucial for giving employees rights. With blockchain technology in accounting, businesses can impose different employee controls based on an employee’s seniority or experience level. With automation offered, effective workload distribution can be done across various teams. As a result, the administration of recording transactions can be done effectively.

  3. Seamless Operation

    As blockchain technology is a distributed system, it may continue to function even when some computing devices experience downtime, enabling organizations that use it to carry out their accounting processes without interruption.

    Unlike a central database that requires updates, has outages, etc. The blockchain accounting system is advantageous because it is a decentralized framework with zero downtime.

  4. Transparency

    Blockchain accounting’s transparency feature works best in organizations that operate on a collaborative approach. It provides real-time visibility of the entries made by the accounting executive, enabling prompt and efficient decision-making.

  5. Tamper-Proof Journals

    All the records are maintained in blocks. There is a timestamp entailed with all the blocks and records, due to which records can be easily traced, making this the most secure and unalterable platform for recording transactions.

    Blockchain being a distributed network, multiple backup copies are available on several computing systems connected to the network.

  6. Auditing and Reporting

    Auditing is a part of accounting. It is one of the essential services that accounting companies provide. Blockchain accounting is beneficial for auditing as the recorded transactions are timestamped, making it simple for the auditors to check with exact dates effectively. A blockchain accounting example is the utilization of timestamps that are beneficial for reports to be prepared in an efficient manner.

  7. Scalability

    Processing workload with the assistance of blockchain technology is simple as opposed to a centralized database which requires hefty investments to optimize the process. Blockchain accounting scales the organization’s accounting procedures to a great extent as it is embedded with modern algorithms that will pace up operations.

  8. Time-Saving

    Processes get quicker due to the distributed framework of blockchain technology. As a result, it saves the accountant’s time in recording a huge number of transactions rapidly. Apart from that, the validation or verification process gets simplified as it allows automation.

  9. Error-Free Recording

    With so many features embedded in blockchain technology, the transaction recording gets extremely precise, due to which the desired results can be gained. With the reduction in errors, the organization can attain actual figures, which will assist them in effective decision-making.

Considering these benefits, the impact of blockchain on the accounting industry will be massive.

How Will Blockchain Technology Affect The Accounting Industry?

In today’s time, every industry is adopting technology to simplify its process and enhance efficiency. Similarly, in the accounting industry too, major technological changes are seen, and blockchain technology is being integrated with the accounting systems for recording transactions. Many accounting firms are using it to record double-entry systems, and some organizations have started recording transactions in triple-entry systems via blockchain.

As a result, terms like blockchain technology in accounting or blockchain accounting systems are gaining immense popularity in the accounting industry. From one viewpoint, blockchain is a top accounting trend as it makes process has become quicker, more accurate, and more reliable. 

But from another viewpoint, accountants must now be more technologically sound to operate blockchain technology efficiently. Also, they must be extra cautious in auditing and verifying every transaction recorded on the block. 

Hence, the impact of blockchain on accounting will be positive and negative. Now that it is up to the organization and its requirements. Based on this, they can decide whether or not to integrate blockchain and accounting.

What Are The Challenges Of Blockchain Accounting?

Blockchain accounting has very few disadvantages, as the accounting process gets way more simplified and accurate by integrating blockchain technology into accounting. But here are a few challenges of blockchain accounting:

Challenges Of Blockchain Accounting

  1. Cost Ineffective

    Unless and until the organization has a heavy budget, adapting blockchain technology is not feasible. Even though being a distributed ledger system comes with its benefit, it also has some disadvantages, like it requires many computing devices to operate efficiently. 

    All the stored data is recorded cryptographically, and to decode that, stacks of supercomputers are required to speed up the process. As a result, the organization’s overhead expenses will skyrocket in no time.

  2. Unfamiliarity With Technology

    Even though blockchain technology has good word-of-mouth publicity, a huge proportion is still uneducated about its adaptability and effective usage. Compared to ERPs and other accounting software, accountants require more training and practice to effectively utilize blockchain technology in accounting.

    Also, accounting firms must recruit skilled IT personnel to configure and tailor the blockchain to their needs. Hence, blockchain accounting has ample benefits, but implementing it is an equally tedious task that would not be a viable option for all accounting firms.

  3. Technical Issues

    At last, blockchain is a technology that contains algorithms. However secure it might be, there are some chances that it might be vulnerable to a cyberattack in one way or another. Even if one code is exploited, hacking the system is not hard. 

    Blockchain technology in accounting is risky because major issues like data loss, reputation harm, and monetary loss can be encountered. The whole organization can come crumbling down just due to one cyberattack. 

    Hence, the blockchain accounting system is hard to establish as the firms must stay vigilant and build a highly secure infrastructure that malicious hackers cannot penetrate.

Wrapping Up

All in all, if the organization has sufficient resources to integrate blockchain technology in accounting processes effectively, it will be highly beneficial for the business. Mainly because the record-keeping process will improve immensely and it can be done in an error-free manner.

Moreover, blockchain accounting systems must be preferred for the accuracy and transparency offered. Discrepancies will be reduced to a great extent as transactions recorded will be validated by the parties associated with the transaction. Hence, organizations have ample benefits if blockchain accounting systems are utilized.

Frequently Asked Questions


Blockchain technology in accounting will immensely support accountants because the accounting system will get more sophisticated, speedy, and precise. In addition, data availability will not be an issue while validating the transactions. The technical learning aspect would be a hassle for accountants. Apart from that, there are ample benefits offered.

Blockchain accounting is extremely useful for business owners or stakeholders. As the cost is reduced to a great extent and, in return, benefits like the accurate recording of every transaction from the initiation, a secured database is offered that cannot be tampered with, and operability is transparent and seamless with little to no downtime.

No, accountants would never be replaced. Their task will be simplified to a certain extent, and automation in the accounting process will also be seen. But the accounting principles to be followed in auditing transactions can only be done manually.

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