Why accountants should understand Bitcoin

Bitcoin has an underlying technology and inbuilt infrastructure known as blockchain technology.

This blockchain is a publicly distributed ledger that holds records of transactions, and thousands of computer nodes manage it. It is hard to tamper or interfere with blockchain technology.

Any changes suggested on blockchain technology require the support of 51% of the computer nodes. Therefore, it is challenging to propose changes on the blockchain. 

Moreover, this digital money was the first currency to popularise blockchain technology, and other businesses are now applying this technology.

These businesses can use blockchain technology to track any transaction, allowing sharing of documents, personal information, and this electronic currency.

Blockchain distribution is across the network; hence tricky to corrupt. 

Accountants are obliged to learn about this electronic asset. Here is why accountants should understand this electronic money.

Auditing

Lately, accounting firms have brought a substantial amount of their annual revenues from auditing engagements.

Auditing is a process where accountants review corporations’ financial statements and verify relevant numbers.

If the financial statements have a correct record, they will sign off on the comments for the company investors. 

However, with Bitcoin-based ventures, the number of companies needing auditing services grows. This digital money will ease the process of verifying financial statements by accountants. 

Portfolio diversification

Because of the enormous opportunities for capital gains, many clients will be looking to diversify into the sector.

However, while only some accountants understand this digital money and its market, learning about them will help provide a comprehensive service for their clients. 

This digital money revolves around a financial market hence why it is a growing financial market. Initially, large financial institutions like banks played a traditional role.

These banks controlled all debit and credit cards. However, this virtual money came up and eliminated the involvement of intermediaries.

This digital asset is unregulated; hence no bank or financial institution can manipulate or regulate the currency. Instead, the public can purchase, sell or trade Bitcoin via oil profit

Because of the many benefits Bitcoin has for users, many people switched to Bitcoin.

Therefore, for accountants to grow their practices in the long run, they should be versatile and include Bitcoin in their resumes. 

Tax implications

This digital money has roles in the investing world despite being the latest financial market.

Moreover, while this electronic asset has remained unregulated and untaxed for the most part, the capital gains seen by investors have caught the interest of the IRS. 

In terms of this digital money taxation, the rules with capital gains only apply when converting Bitcoin back to fiat money.

Like any trading gain, such as stocks or bonds, this virtual money involves taxation. 

So, accountants and those pursuing a financial planning degree can specialize in Bitcoin-related gains for tax purposes.

For instance, any transaction made with this virtual money may be subject to tax. 

Helps promote transparency

No one can erase blockchain records and transactions as they are permanent.

Also, blockchain is a publicly distributed ledger; hence very transparent, and every blockchain user can access transactions.

Therefore, this transparency of blockchain technology leads to transparent transactions.

So, accountants should take time to understand this digital money as it allows transparency in their undertakings. 

Accountants go through tons of books of records and financial statements. To ensure that every transaction makes sense and is clear, they need to understand this digital money.

The takeaway

Many businesses are integrating blockchain technology in their operations due to the transparency and good organization this technology provides.

Ultimately, accountants need to understand this virtual money for various reasons depending on their regions and industries. 

Have any thoughts on this? Carry the discussion over to our Twitter or Facebook.

Editors’ Recommendations:

• 7 benefits of automation in accounting
• Why you should be using a mobile accounting app for your small business
• Bitcoin’s significance and risks
• How to protect Bitcoin against hacks and theft