BLOCKCHAIN TECHNOLOGY: EVERYTHING YOU NEED TO KNOW

Special Topics in Accounting

Lecturer: Prof. Susi, S.E., M.B.A., Ph.D., Akt.

Group 4

Group Member:

1. Azaria Nabila 2211031003

2. Bintang Adzka Al-Hafidz 2211031140

3. Reishandra Sefa Prasetyo 2211031115

ACCOUNTING DEPARTMENT

FACULTY OF ECONOMIC AND BUSINESS

UNIVERSITY OF LAMPUNG
 PREFACE
In the first place, we deliver praise and gratitude towards The One Almighty God because of
God abundant blessings and gifts so that we can finish this paper entitled BLOCKCHAIN
TECHNOLOGY: EVERYTHING YOU NEED TO KNOW properly. This paper was created
with the aim of fulfilling one of the assignments from the Special Topics in Accounting
Course at the Faculty of Economy and Business, Lampung University.

We would like to thank all those who have participated in the preparation of this paper,
especially the lecturer in charge of this course, Prof. Susi, S.E., M.B.A., Ph.D., Akt. who has
given us this assignment.

We have tried our best to finish this paper so that it can be useful for its readers. However, like
ordinary people, we realize that this paper is still far from perfect. Therefore, we always
expect and accept any kind of critics and suggestions. Hopefully, this paper can provide a
broader insight to the reader.

Bandar Lampung, February 26th, 2024

Compiler,

Group 4

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 TABLE OF CONTENTS
PREFACE .................................................................................................................................................... ii
TABLE OF CONTENTS ............................................................................................................................... iii
CHAPTER I INTRODUCTION...................................................................................................................... 1
1.1 Background ............................................................................................................................ 1
1.2 Problem Statement ................................................................................................................. 2
1.3 Objectives............................................................................................................................... 2
CHAPTER II DISCUSSION .......................................................................................................................... 3
2.1 Analysis................................................................................................................................... 3
2.2 Solution/Strategy ................................................................................................................... 8
CHAPTER III RESULT ............................................................................................................................... 10
3.1 Result.................................................................................................................................... 10
3.2 Lesson Learned..................................................................................................................... 11
3.3 Recommendation ................................................................................................................. 11
REFERENCES........................................................................................................................................... 13

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 CHAPTER I
INTRODUCTION
1.1 Background

Blockchain technology has undergone rapid development in recent years, and its impact
on various industries, including accounting, is increasingly recognized. Although it has
been around since 1991, it has only recently begun to be widely applied and recognized as
a potential solution to a number of challenges in conventional data logging systems
(Pintu, 2022).

Blockchain is essentially a secure and transparent distributed ledger that records

transactions permanently (ITbox, 2023). The main potential of this technology is its
ability to change the way accountants work and provide significant benefits to companies
and individuals (Bandaso, Randa, & Mongan, 2022).

When we discuss the importance of blockchain, we must understand the challenges faced
in conventional data logging systems. Issues like reliability, security, and trust are often
top issues. Blockchain is emerging as a solution to overcome this uncertainty by
providing a decentralized, transparent, and secure data storage mechanism. This means
that every transaction that occurs can be monitored by all relevant parties and cannot be
changed without the consent of the majority of the network (Bandaso, Randa, & Mongan,
2022).

The way blockchain works is fascinating. Each time a new transaction occurs, the
information is recorded in a new block. These blocks are then added to the chain of pre-
existing blocks, forming an immutable transaction history. The key to blockchain security
is the use of cryptographic hash functions, which create a unique token for each block and
associate it with the previous block in the chain. This process also requires network
consensus, where every participant in the network must agree to validate and add new
blocks (Sigit, 2023).

The main benefits of blockchain technology include security, transparency, and efficiency.
By its decentralized nature, blockchain offers a high level of security, as data cannot be
manipulated without the consent of the majority of networks. Transparency is built into its
structure, as all transactions are visible to all parties involved. In addition, by reducing

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 reliance on third parties and manual processes, blockchain can improve overall
operational efficiency (Nugrahanti, Puspitasari, Andaningsih, Fazrin, & Soraya, 2023).

This paper will explore how blockchain can be used to improve the efficiency and
accuracy of accounting processes, increase transparency and security of financial data,
and reduce the risk of fraud. In addition, the paper will also discuss the impact of
blockchain on the accounting profession and the current technology used in accounting
firms.

1.2 Problem Statement

The main issues of this Blockchain case study are:

• Will the adoption of blockchain technology negate the need for professional
judgment of accountants in recording and reporting transactions and events?
• How will the role of accountants transform with the application of blockchain in the
accounting process?
• What technologies or programs are currently used in accounting firms to perform
accounting tasks in business, and are there any technological developments or
alternatives available through internet research?

1.3 Objectives

The achievable goals are as follows.

• Understand the implications of blockchain technology on accounting processes and

the role of accountants.
• Identify opportunities to leverage blockchain technology to improve efficiency and
accuracy in accounting tasks.
• Develop strategies to adapt to the changing accounting landscape due to blockchain
technology.

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 CHAPTER II
DISCUSSION
2.1 Analysis

The case study analysis was conducted by answering some of the questions below:

1.Will the adoption of technology such as blockchain mean that accountants no longer
need to use professionals’ considerations in determining how to record or report
transactions and events?

The use of technologies such as blockchain will not eliminate the need for professional
expertise of accountants due to the following reasons:

a) Blockchain Limitations:
• Blockchain cannot interpret qualitative data. For example, accountants still need
to use professional judgment to assess whether a transaction is a capital
expenditure or expense.
• Blockchain cannot automate all accounting tasks. For example, accountants still
need to reconcile banks and prepare financial statements.
• Blockchain is still in the early stages of development. One of its main challenges
is its scalability. As transaction volume increases, the performance of the
blockchain network can be affected. In addition, the use of blockchain also carries
risks and uncertainties. For example, data security and privacy are major concerns
due to the decentralized nature of these technologies. There are also risks
associated with ever-evolving regulations that are not yet fully thorough to
understand the implications of blockchain use in various industries (HM &
Junianti, 2023).
b) Accountant Role:
• Accountants have a broader role than simply recording transactions. They also
serve as financial advisors and consultants to companies. In addition to recording
transactions, accountants provide advice on financial strategies, tax planning, and
investment decisions to their clients. This requires a deep understanding of the
client's financial situation, which cannot be completely replaced by technology
(Bandaso, Randa, & Mongan, 2022).

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 • Accountants use their knowledge and experience to help companies make
informed financial decisions. Although blockchain is capable of recording
transactions with high transparency and security, data interpretation and analysis
still require professional expertise. Accountants not only record transactions, but
they also analyze financial information to provide valuable insights to the
companies or entities they serve. Blockchain in the field of auditing will allow
auditors to verify large amounts of data in a short period of time. In fact, the
application of blockchain technology can reduce the cost and time required to
conduct audits (Bandaso, Randa, & Mongan, 2022).
• Accountants understand the complexities of accounting regulations and can help
companies ensure their compliance. Many industries are still subject to strict
regulations that require proper financial reporting. Although blockchain can
facilitate the reporting process, it is still necessary to have a professional
accountant present to ensure that the reporting complies with all applicable legal
and regulatory requirements. Although blockchain technology can automatically
manage and record transactions, monitoring and supervision are still necessary to
guarantee the reliability and accuracy of the data recorded in the blockchain.
Professional accountants are still required to manage systems, analyze data, and
ensure compliance with applicable accounting standards.
c) Impact of Blockchain on Accounting:
• Blockchain can simplify the accounting process and make financial data more
accessible.
• Blockchain can increase the transparency and security of financial data.
• Blockchain can allow accountants to focus on more value-added tasks.

The adoption of blockchain will change the role of accountants, but it will not completely
eliminate the need for their professional expertise. Accountants will still have a crucial
role in helping companies understand and utilize financial data for making the right
decisions. (BINUS, 2022).

Here are some examples of how blockchain can change the role of accountants:

Blockchain is bringing about a major shift in accounting, shifting the focus from mere
transaction recording to more in-depth planning and valuation. With the implementation
of blockchain, accountants no longer have to spend excessive time on data reconciliation

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because the records contained in the blockchain will always be consistent with those
owned by customers. An example of the application of blockchain in a triple-entry
accounting system as described by Cai is quoted from (Bandaso, Randa, & Mongan,
2022) is when Alice and Bob create a digital contract that is self-executing and comes
with payment rules. Once the service is completed, payments are made automatically
through smart contracts embedded in the blockchain.

Vasques (2021) quoted from (Bandaso, Randa, & Mongan, 2022) added that blockchain
brings various qualities required in the accounting profession, such as improving data
quality, reducing fraud, increasing trust, as well as enabling more in-depth analysis.

According to CPA Canada (2017) quoted from (Bandaso, Randa, & Mongan, 2022), the
use of blockchain technology opens up new opportunities to increase efficiency in
financial reporting and auditing processes. This can be seen from various documents such
as account reconciliation, balance sheets, journal entries, and general ledgers that must be
prepared for auditors. Previously, the preparation of this document took quite a long time
in audit planning.

However, with the adoption of blockchain and the ability of auditors to access data in
real-time through read-only mode, auditors can more easily obtain the information needed
for auditing purposes. Blockchain technology, particularly in the digital age, allows
auditors to use automation, analytics, and machine learning to get real-time information.

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Blockchain has great potential to improve the accounting profession by reducing the cost
of maintaining and reconciling ledgers as well as providing absolute certainty of
ownership and assets. This technology can help accountants to gain clarity over the
available resources and obligations of their organization. In addition, blockchain can also
free up resources to focus on planning and assessment, rather than just on routine record
keeping.

In the future, blockchain has the potential to replace many of the traditional roles of
accounting, especially in calculations or bookkeeping which are often prone to human
error. Nevertheless, the role of an accountant will not be completely replaced by
technologies such as blockchain. Instead, they can position themselves as business
advisors who use their professional judgment to help organizations understand the
financial challenges of the coming digital age.

With blockchain technology automating most accounting tasks, accountants can shift their
focus to in-depth analysis, data interpretation, as well as providing more valuable
strategic advice for clients or organizations. This means that the role of accountants will
evolve to become more strategic and proactive in helping organizations deal with change
and optimize their financial performance in the digital era.

2. What technologies or programs are currently used in accounting firms to perform

accounting tasks in business, and are there any technological developments or
alternatives available through internet research?

Based on the search results from several sources, there are many types of accounting
software available, ranging from simple programs designed for small-scale companies to
comprehensive and complex solutions for large-scale enterprises. These software
programs are commonly used by companies or accounting firms to streamline the
accounting cycle, such as:

• General or simple programs such as Microsoft Excel, Word, or email

• Accounting software like MYOB, Microsoft Office Accounting Express
• Auditing software: SAP Audit Management, etc.
• Tax preparation software.
• Document management software for client files.
• Project management files

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With the rapid growth of technology in today's era, accounting software has evolved and
innovated, such as integration with AI or artificial intelligence and machine learning,
cloud-based accounting data software, implementation of blockchain technology in
accounting, and enhanced security. Below are the explanations:

• Artificial Intelligence (AI): AI is a technique or science in creating intelligent

machines, especially in developing intelligent computer programs. AI aims to create
programs, robots, or computers that can operate with intelligence similar to humans
(John McCarty, 2007) retrieved from (Akmaluddin & Dewayanto, 2023).
In the context of accounting, the development of AI has transformed some business
and accounting practices. Many large companies now use software to assist in
compiling financial reports. AI has been utilized in auditing, finance, and
management accounting fields, with expectations that its usage will spread to all
aspects of the accounting profession, reducing routine tasks previously performed by
accountants. Organizations widely adopt artificial intelligence due to its ability to
improve operational efficiency and reduce costs.
• Cloud accounting database: Cloud computing is the delivery of various services over
the internet, including applications such as data storage, servers, databases, networks,
and software. Cloud computing is a popular option chosen by large companies for
implementing their data storage systems. Cloud accounting database systems offer
many advantages, such as:
1) Cost and Time Reduction: By implementing cloud systems, companies can save
significant time and costs, especially for large companies. Large companies often
face issues with traditional ERP software, such as high costs due to manual
installation on each computer, licensing fees based on the number of users or
computers, and non-real time balances due to manual input of each transaction
data. Additionally, the installation of this software one by one can be time-
consuming.
2) Accessibility to All Accounting Information: Cloud-based accounting enables
anyone in your company to access accounting data anytime. There's no need to
edit and send information via email to internal contacts. Experienced employees
can create reports and analyze data if they have accounting software account
credentials, allowing internal management and executives to receive information

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 and make decisions faster without relying on other accounting staff to provide
necessary information (Kesuma & Reinaldy, 2013)
3) Accessibility to All Accounting Information: Cloud-based accounting enables
anyone in your company to access accounting data anytime. There's no need to
edit and send information via email to internal contacts. Experienced employees
can create reports and analyze data if they have accounting software account
credentials, allowing internal management and executives to receive information
and make decisions faster without relying on other accounting staff to provide
necessary information.
• Implementation of Blockchain in Accounting: The implementation of blockchain
technology in accounting applications promises significant benefits for companies. By
using blockchain as a distributed ledger, companies can create interrelated and
tamper-proof accounting record systems. Transactions can be directly recorded in a
shared ledger, ensuring data integrity, and preventing manipulation or deletion
practices. This not only simplifies compliance with regulations but can also reduce
audit costs and time by allowing auditors to automatically verify most of the critical
data in financial reports. With guaranteed record integrity and comprehensive audit
trails, blockchain has the potential to transform how audits are conducted, enabling
auditors to focus on more valuable and complex tasks. With gradual integration into
standard accounting procedures, blockchain as a trusted source can bring greater
efficiency and transparency in managing a company's financial data (BINUS, 2021).

2.2 Solution/Strategy

Solutions or strategies that we can propose to overcome the potential disruption and
transformation of the accounting profession due to the adoption of blockchain technology
are as follows:

This approach aims to help accountants understand and use blockchain technology better
in their work. This is done through several steps:

1. Education and Training: Provide courses and training to accountants on blockchain

technology. The goal is for us as accountants to understand what blockchain is and how it
works. With a better understanding, we can see how this technology can be applied in
accounting work.

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2. Blockchain Integration in Accounting System: Using blockchain technology as part of
the accounting system. As explained in the analysis, blockchain technology can help
improve transparency (all transactions can be seen by interested parties), security (data
cannot be changed easily), and efficiency (faster and automated processes).

3. Adaptation and Innovation: Encourage accountants to think more creatively about how
to use blockchain. This could include finding new ways to utilize it in our daily work or
even developing new tools based on this technology. By adapting and innovating,
accountants can remain relevant and competitive in the future.

Blockchain technology has great potential to change the way accounting works. By
understanding and using this technology effectively, accountants can:

• Increase the efficiency and accuracy of their work.

• Reduce the risk of errors and fraud.
• Save time and money.
• Stay competitive in an ever-changing business world.

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 CHAPTER III
RESULT
3.1 Result

Based on the case study analysis, the adoption of technology such as blockchain does not
mean that accountants will no longer need to use professional considerations in
determining how to record or report transactions and events. This is due to several
reasons:

1. Blockchain Limitations: While blockchain offers benefits such as data integrity and
transparency, it has limitations. Blockchain cannot interpret qualitative data and
cannot automate all accounting tasks. Additionally, blockchain technology is still in
its early stages of development and faces challenges such as scalability and risks
related to data security and privacy.
2. Accountant Role: Accountants have a broader role beyond transaction recording.
They serve as financial advisors and consultants, providing advice on financial
strategies, tax planning, and investment decisions. Accountants use their knowledge
and experience to help companies make informed financial decisions, analyze
financial information, and ensure compliance with accounting standards and
regulations.
3. Impact of Blockchain on Accounting: While blockchain can simplify the accounting
process and increase transparency and security of financial data, it will not eliminate
the need for accountants. Instead, it will change the role of accountants to focus more
on value-added tasks such as data analysis and interpretation.

Regarding the technologies and programs currently used in accounting firms, several
types of accounting software are commonly utilized, ranging from general programs like
Microsoft Excel to comprehensive solutions like auditing software and tax preparation
software. With advancements in technology, accounting software has evolved to integrate
AI, machine learning, and cloud-based solutions to enhance efficiency, accuracy, and
accessibility of financial data.

In summary, while technologies like blockchain have the potential to transform

accounting processes and improve efficiency, they will not replace the need for
professional expertise and judgment of accountants. Accountants will continue to play a

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 crucial role in providing financial advice, ensuring compliance, and analysing financial
data to help organizations make informed decisions.

3.2 Lesson Learned

The case study highlights several key lessons regarding the adoption of technology,
particularly blockchain, in the accounting profession. Firstly, it underscores that while
technologies like blockchain offer significant benefits such as increased transparency and
security of financial data, they do not eliminate the need for professional expertise and
judgment of accountants. Accountants play a crucial role beyond transaction recording,
providing financial advice, ensuring compliance, and analysing financial information.
Secondly, the case emphasizes the evolving role of accountants in leveraging technology
to focus on more value-added tasks such as data interpretation and analysis. As
technologies like blockchain automate routine accounting tasks, accountants can shift
their focus to strategic planning and assessment, thereby enhancing their role as business
advisors. Lastly, the case highlights the importance of understanding the limitations and
challenges associated with implementing new technologies like blockchain, such as
scalability issues and regulatory uncertainties. Overall, the case underscores the
importance of striking a balance between leveraging technological advancements and
preserving the invaluable expertise and judgment of professional accountants in
navigating the complexities of financial reporting and decision-making.

3.3 Recommendation

Based on our analysis and the insights gained, there are several recommendations that can
be implemented to advance the accounting profession into the era of blockchain
technology.

First, education and training are critical components in this transition. Accountants should
be provided with comprehensive training courses and programs that focus on blockchain
technology. By increasing their understanding and proficiency in using blockchain,
accountants can effectively adapt to the ever-evolving landscape of accounting practices.

This educational emphasis naturally leads to the integration of blockchain technology into
accounting systems. Encouraging the incorporation of blockchain into these systems
offers many benefits. It increases transparency, improves trust in financial records, and
also strengthens security measures against potential breaches. In addition, the efficiency

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gains made from blockchain integration streamline processes, optimizing resource
allocation within the accounting framework.

However, successful blockchain implementation depends not only on technical

integration, but also on developing a culture of adaptation and innovation within the
profession. Accountants should be encouraged to explore new applications of blockchain
technology in everyday practice. This could involve the development of bespoke tools
and methodologies that utilize blockchain capabilities to address accounting challenges.

Furthermore, this cultural shift highlights the importance of strategic focus. Accountants
are urged to transcend the traditional role of mere record-keepers. Instead, they should
leverage blockchain's data-rich environment to delve into comprehensive analysis,
interpreting financial data to provide strategic insights and informed guidance to
businesses navigating the complexities of the digital age.

Nevertheless, this transition must be tempered with a deep understanding of regulatory

frameworks. Accountants must stay abreast of the evolving landscape of blockchain
regulations, recognizing both the opportunities and constraints they present. By
navigating these regulatory waters adeptly, accountants can ensure compliance while
mitigating potential risks associated with blockchain implementation.

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