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Accounting, Blockchain and Cryptocurrency

Accounting, Blockchain and Cryptocurrency

22 Dec 2020

Reading Time: 5 minutes

We live in such Changing Times.
The intention of this blog is to share some time saving tips which will also help you to save you money. These tools that have been created to serve you - Especially if you run a business.
One of the most time demanding requirements with running a business can be Accounting and Balancing the Books. For some, the financial side of their business is undesirable to invest energy into and yet it is essential to every successful business; no matter how much we may wish for it to disappear.
Let's go on a journey to discover what is available to us..

So What is Available to us to support our Business?

Many business owners will hire an Accountant and or Bookkeeper to track their finances whereas others will purchase Accounting Software and manually insert the details themselves (which still requires time to complete). Unfortunately, human error is responsible for a significant percentage of bookkeeping mistakes resulting in additional costs up to and including thousands of dollars a year. In a small business, you cannot afford to make these types of mistakes. 

Imagine the ease if there was a platform that validates, tracks, and keeps a permanent and unalterable record for your business?

Blockchain does!

What is Blockchain?

Blockchain technology is essentially a database and leger that keeps track of any and all transactions and flags any false transaction and potential mistakes instantly. Blockchain technology also keeps records of all transactions which cannot be altered once they are inside the blockchain.

You may have heard of Blockchain Technology before, and that is because Blockchain is the backbone of cryptocurrency.

Cryptocurrency as I’m sure you may well know by now, is a Decentralised Digital Currency that uses blockchain technology to perform transactions. Bitcoin is the most well known in the world. It rose to fame in December 2017 when it hit an all-time high price of $20,000 USD. This prompted people to see it as a serious investment both investing in Cryptocurrency and too, seeing the value in “Mining”.

What is Mining?

Mining is when you work with your computer and its GPU (graphics card) to process other peoples transactions that happen on the Blockchain. It requires you to do nothing beyond have the program running in the background. This can earn you Cryptocurrency after a certain amount of transactions have been processed but is not a get rich quick scheme.

While there may still be people who have their concerns regarding Cryptocurrency, Blockchain is its own independent entity. As with all things, it is useful to not throw the baby out with the bath water. Blockchain is an independent piece of technology that has many uses besides being the backbone of cryptocurrency. Its record keeping and validation abilities make it the best choice for any transaction-based business.

What are the benefits of using Blockchain Technology for Accounting Purposes?

  • Absolute Clarity 

As an Accountant, one thing that can be a challenge is getting clarity around Client Assets. With Blockchain, every asset is linked to its actual owner which makes it easier for all involved - Including your time as a Business Owner.

  • Reducing Costs

Maintaining ledgers can be both Costly and Time-Consuming. Still, Blockchain Technology can alleviate both of those as it does not need to be maintained and it is permanent by design.

  • Transparency 

Many people will try to hide Income and Assets to pay less Tax. With Blockchain, any asset or expense is recorded and made available for the accountant to see. This will reduce the amount of time they will need to look for specific costs and significantly improve their productivity. The Benefit to the client being honest off-sets are also seen so one can maximise on their return.

Is Blockchain Technology Reliable to use for Accounting Purposes?

Blockchains are becoming a lot more user friendly to use as their applications for transactions, logging, and transparency. This is great news for many Businesses and Industries. Using Blockchains will help remove any false claim of ownership and keep accurate records of all transactions. Blockchain will also block any inaccurate transactions, thus eliminating any simple mistakes that can be otherwise overlooked.

Is Cryptocurrency classed as an Assets?

Many people wonder about Cryptocurrency in the context of accounting as to whether to classify it as an asset, investment, or form of income. Right now, government offices such as “Centrelink” (Australian - “Social Security” in the USA) classify them as an asset which means you need to mark them down as such on your taxes and when reporting.

Is it easy to add Cryptocurrency to your Tax Return?

Cryptocurrency can still be a little difficult to add to your tax as most Crypto buyers will use multiple Wallets and Exchange Sites to Buy and Sell. This means that in order to add each transaction and coin you will need to add them individually. This is one of the reasons that many accountants do not like to deal with clients who have Cryptocurrency Assets and where the value of Blockchain accounts can support ease in this regard.

Is there an Easier Way?

Surprise, Surprise, there is an App for this exact purpose and can be an excellent tool for both accountants and Cryptocurrency Holders. Thankfully, there are also multiple tools that can be used to calculate your Cryptocurrency Tax. This makes your accountant's job much easier and will allow you to get the maximum amount from your Tax Return.

What software is Available?

“Accointing” is an excellent example of solid cryptocurrency accounting software. With this, you can track every transaction you make and connect to every wallet and exchange you use. There are multiple cryptocurrency accounting software’s available, but this is by far the simplest to use. 

Will Cryptocurrency be seen as usable as regular Currency? 

This is a question that many Cryptocurrency Experts have been asking for years. If it does, it will change the very way we live our lives and pay our taxes and this is being predicted to roll out as soon as 2021.

What else can we expect to see in Cryptocurrency in 2021? 

2021 will be a very interesting year for cryptocurrency as Big Businesses are starting to see and adopt the practicality of using cryptocurrency as an alternative payment gateway to traditional currency. Companies revolutionizing this transition include the likes of Visa and PayPal thus far.

Earlier this month, PayPal announced that they would allow users to buy, store and sell cryptocurrency directly from their platform. This will simplify the process of transferring money from your bank account and onto an exchange site. It will also expose many more people to the world of cryptocurrency as PayPal has over 364 million users who will now have an option to partake in cryptocurrency.

Another company that is making cryptocurrency more mainstream is Visa which has partnered with Coinbase, one of the most significant exchange site in the world to create a Visa debit card that people can use to spend their cryptocurrency on real-world products same as they would a bank card.

This works by taking the owed amount directly out of your Coinbase account and converting your chosen cryptocurrency to the cash value of said coin. It is an ingenious idea that will finally see cryptocurrency used alongside traditional currency.

This could even lead to businesses paying employees with either money or cryptocurrency. This also helps to make life easier with the added benefit of blockchain technology and the accounting software we wrote about earlier. The desired outcome for it to flow just as smoothly as it would have with regular currency.

Are their Conversion fees with the VISA Cryptocurrency card?

The one drawback with the Visa debit card is that there will be some conversion fees associated. At this stage they do appear to be very minimal. This however is a minor drawback from something that is set to change the way we buy things. We are all quite familiar with the potential for associated fees such as transaction and withdrawal so this isn't a massive change from what we are used to.

The Visa debit card also comes with a rewards program similar to traditional credit cards where you can earn points towards cryptocurrency. This will encourage more people to use this card which will help move the cryptocurrency market along.

What about the volatility of cryptocurrency?

By its very nature, cryptocurrency is volatile. It can change in price at the drop of a hat, and this is a big reason that so many people are apprehensive about investing and using it as an alternative currency. Some cryptocurrencies known as Stablecoins are free from the abruptness of the price jumps but not completely immune.

The main reason coins like Bitcoin are so volatile is due to the lack of support it has. Still, with the supply of Bitcoin being halved every four years and with interest at an all-time high, has taken some of the edge off for now.

Will Bitcoin ever be stable enough to be used alongside Traditional Money?

We have seen in the past how wild some of the swings can be, and it is only recently that Bitcoin has gained some consistency within the crypto market. Bitcoins price is $23,136 AUD at the time of writing and it has been steadily increasing over the last three months; set to continue this growth. One concern is another sudden drop like what was witnessed in March due to COVID (most coins did drop in price because of).

It appears that Bitcoin has gained some balance and consistency, which is promising for those who are invested in the idea of it being used as an Alternative Currency.

The main point to take away from this is if Bitcoin does end up being used as a genuine alternative, this will not have any adverse effects on accountants or your books thanks to the Blockchain Technology and Accounting Software having all of the answers right there - no need to find the receipts.

When we look to the future of business transactions, It is useful to think of ways to make thing simpler, faster, and safer, which again is what Blockchain Technology provides.

How does this Affect the Banks?
Right now, the big banks of the world are slightly against the idea of Cryptocurrency and Blockchain Technology due to the potential loss of business for them. Still, many people are happy with the idea of not going through a big bank to do a simple money transfer and would instead prefer to do it over a secure ledger.

Although it is still an infant when compared to traditional currency, Cryptocurrency appears to be on the cusp of being used alongside money within the next few years in most first world countries. For something Like Cryptocurrency that was once called useless and a waste of time to be positioned as a real alternative for purchasing goods and services is a fantastic sign of the times.

How does this impact Big Business?

FedEx is the world’s largest delivery company, and ships packages across the globe and as such have a massive back catalogue of orders, payments and details that need to be managed. Using Blockchain for high-cost cargo is something they have been doing for years. It helps make sure the item is delivered to the right address and or courier with accuracy.

For a company like FedEx to adopt this new technology is very promising and encouraging for any small business that was still wary of using it. It is not just FedEx either as Burger King, IBM, Walmart, Mastercard and Microsoft all utilising the benefits of Blockchain Technology.

Companies like MasterCard and Microsoft who are globally traded companies that handle billions of dollars’ worth of products and money each year need accurate ways of tracking their finances. Blockchain technology gives them this along with transparency so their stakeholders can see where their money is going and how it is being used.

Cryptocurrency and Blockchain Technology appear to be the future of our financial world. To keep up with all the latest news and cryptocurrency prices. Take a look at our crypto tracker which lists the hourly prices of all major cryptocurrencies.

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