In the early 90s when the internet was still in its development stages, only a few individuals envisioned cashless currencies such as bitcoins. Bitcoin is a cryptocurrency that mainly depends on the internet to maintain accounts and transactions. Bitcoin has gained a lot of acceptance in today’s financial markets due to its convenience and efficient accounting practices. The effects of bitcoins are evident for any individual in the financial industry such as accountants and auditors.
Traditional Accounting Practices
To ensure that all the transactions in a business are well accounted for, the traditional accounting practices demand that accountants make a double entry into the books. In any transaction, there should be a debit side and the credit side of the account noted down.
For instance, when a payment is received, the debit side should be deducted, and the credit side debited simultaneously for the same transaction. This process can be quite time-consuming and costly.
Auditors are regularly required to edit accounts so that authenticity can be maintained at all times, which further increases costs. It is also less efficient for interinstitutional transfer of funds like in the case of interbank transfers for instance. In this accounting model, banks and other institution have to come together and reconcile their accounts constantly.
Bitcoin Accounting Practices
Bitcoins accounting practices are quite different from the traditional accounting. Bitcoins accounting uses a triple entry method instead of double entry. The transactions are recorded in three databases that are distributed across the internet making them easier to trust and verify. This makes bitcoins quite reliable and cheap to all organizations involved.
The entries are also made live in all the accounts involved making it easy for the parties involved to monitor their transactions in real time. There is no longer a need to reconcile affected accounts, making bitcoins a more timesaving and economical option. Bitcoins transactions are also encrypted ensuring that there is no interference of a third party. Encryption of the transactions also ensures that the identity of the parties involved is not revealed.
How Bitcoins Will Affect the Accounting Field
It is clear that bitcoin holds numerous benefits to the users when it comes to accounting. With bitcoin, everything is automated making it less labor intensive compared to the traditional accounting practices.
However, bitcoins, due to its low labor intensity, may affect the demand for traditional accountants. But it is also important to note that bitcoins cannot address all the accounting requirements of an organization, therefore those with a master’s degree in accounting will still be in high demand due to their extensive knowledge and experience in the accounting field.
Today, attaining a master’s degree in accounting is easier than ever through various institutions that offer online masters in accounting. Current accounting masters are equipped with the necessary knowledge to understand the bitcoin accounting.
Bitcoin acceptance has been on the rise making it one of the highly developing cryptocurrencies available. It is only a matter of time before adoption of bitcoins become a reality in most financial institutions, transforming the world of accounting forever.