Blockchain in accounting: What is it and how it affects practices

You may have heard about blockchain in the context of cryptocurrency. But, as a form of distributed ledger technology (DLT), the blockchain could be used to record transactions of all kinds, as well as rights, obligations and ownership interactions. And that has implications for accounting.

Coupled with the use of AI, blockchain accounting could save you tons of time on manual data processes, auditing, and fraud prevention, by providing an open, secure, and transparent ledger. Your practice could use the additional time to focus on strategic advisory work, or grow your client base.

It’s a complex topic, but this beginner's guide will help you get to grips with the basics of blockchain in accounting.

What is blockchain accounting?

Blockchain is a type of distributed ledger technology (DLT). It offers an alternative way to record and transfer value. Think of it as a series of Lego bricks, all fitted together in a neat structure. Every brick contains transaction information. A new Lego brick is added to the structure every time someone completes a transaction.

Unlike a traditional ledger, blockchain isn’t owned by a single person or organization. The same ledger exists across multiple computers, and can’t be controlled by any single entity. Blockchain accounting provides full transparency – so an accountant, auditor, and client can all access an identical ledger to verify transactions.

Records on the blockchain are permanent and transparent, making them hard to manipulate. This could significantly reduce fraud and errors, giving accounting professionals more time to focus on higher-value work.

The impact of blockchain on the accounting profession could be significant. Blockchains contain a complete, public record of transactions (including digital signatures and time stamps) – so proof that transactions have occurred is virtually indisputable. This could make international trade easier and more secure for US businesses, since supply chain activities can be more easily traced.

The ledger is transparent, so auditors can quickly establish whether a transaction is legitimate. And the use of cryptographic keys – which lock and unlock data – helps to keep blockchain records safe and secure.

Blockchain accounting examples

Major firms like Deloitte, PwC, KPMG and EY are already researching and experimenting with blockchain accounting services.

Let’s look at Deloitte’s blockchain accounting examples. The firm now offers blockchain technology implementation, advisory on crypto-based payment solutions, and ensuring compliance with regulations. EY also offers a range of solutions relating to blockchain in accounting. These include a blockchain analyser reconciler tool that can be used to reconcile, follow and match transactions.

Industry bodies are responding to the rise of blockchain accounting, too. AICPA has released self-study materials on blockchain and digital assets to help accounting and finance professionals get up to speed with the technology.

It’s also worth noting that taxpayers now need to report crypto assets – which are recorded on distributed ledger technologies such as blockchain – to the IRS.

Blockchain for accounting benefits

Blockchain in accounting transforms the ledger, and the roles of accountants, bookkeepers, and advisors as we know them. Here are some of the key benefits:

1. Increased efficiency: When transactions occur on the blockchain, they’re automatically recorded on the secure ledger – reducing manual data entry and the chance of human error. This can also help with the auditing process since transactions can be traced and verified on the blockchain. So, auditors have more time to investigate fraud, and practices have more time to deliver strategic services instead of filtering through transactions.
2. Enhanced security: Blockchains use a combination of tools, such as encryption, digital signatures, and cryptographic keys to keep data safe. Once a transaction is recorded on the blockchain, it’s virtually impossible to tamper with or remove. This makes it harder for fraud and cybercrime to slip through the net. Plus, rigorous data security practices can support compliance with state privacy laws like the California Consumer Privacy Act (CCPA).
3. Improved transparency: Blockchain in accounting means a client, accountant and auditor can all access an identical ledger. This helps when it comes to verifying transaction data and keeping track of what is spent and earned.

Disadvantages of blockchain for accounting

The same complexity that makes blockchain technology so powerful can also present challenges. Here are some disadvantages of blockchain in accounting to note:

1. Requires upskilling: Because blockchain technology is complex, accountants and bookkeepers will need to acquire new skills to use it. In the future, accounting professionals could see their skill sets shift further towards technology and IT. Taking an AICPA blockchain qualification, or exploring training with other industry bodies is a worthwhile pursuit.
2. Regulatory uncertainty: Blockchain regulations are still in development around the world. The IRS requires taxpayers to report on cryptoassets, but as far as accounting-specific blockchain regulations go, there’s no legislation in place yet.
3. Lacks standardisation: There’s no industry standard or consensus for how to use blockchain in accounting. This makes it difficult for practices of all sizes to know where to start with the technology.
4. Issues with scalability: Blockchain can become slow when lots of transactions flood the network, and competition for processing those transactions is high. Block sizes are limited, and blockchain requires a network of ‘miners’ – blockchain users who verify transactions in a new block – to complete complex mathematical problems for a space on new blocks.
5. Resistance to change: Blockchain could demand a significant change in mindset and approach for accounting professionals. This could feel overwhelming, and some accounting professionals may be more resistant to change than others.

How blockchain is used in accounting today

Blockchain accounting is a relatively new concept – so research and use cases are still in their infancy. However, we already have a clear idea of how the technology could be applied to accounting.

Firstly, tracking the supply chain could become much easier. Like a trail of breadcrumbs, each product has a unique identifier and can be traced every step of the way on the blockchain. Plus, blockchain facilitates a reliable and permanent record that can be traced in real time. And because blockchain is decentralised, there’s no risk that practices would lose the information should a single organization or operator fail.

Storing financial data safely and securely has always been of vital importance in the accounting industry. With layers of encryption and cryptographic keys, blockchains offer a fortress of high security. This could be helpful particularly for industry-specific laws like the Health Insurance Portability and Accountability Act (HIPAA), where safeguarding sensitive client data is vital to compliance.

Blockchain could also bring about an era of triple-entry accounting – where a third entry is made on the blockchain, providing a secure and permanent set of records on the distributed ledger.

The use of smart contracts – self-executing contracts where, once all conditions are met, payment, goods, or services are automatically released – could also make it easier to settle the bill. Firms would do away with complex invoicing procedures by using smart contracts on the blockchain to facilitate payment, reducing the occurrence of late payments, unpaid invoices, and disputes.

The blockchain provides a secure and decentralised ledger that auditors can use to validate the legitimacy of a transaction. Once they’re on the blockchain, transactions can’t be altered or removed – which means auditors can trace them back.

What’s more, transactions can be reviewed and verified in real-time, so there’s generally no delay between a transaction occurring and auditing it. In some cases, transactions on a blockchain may be sufficient evidence for auditors to complete their assessments.

What’s the future for blockchain in accounting?

The future of blockchain accounting is still in development.

We’ll likely see the technology streamlining transactions; through a combination of blockchain and smart contracts, payments will be settled faster, and will be easier to verify by auditors.

Blockchain makes transaction-level accounting possible. Accountants and bookkeepers will no longer need to do reconciliations, but will still need to verify details about the assets and transactions (like the location and recoverable value).

Audit trails are likely to become more secure and reliable. With transactions permanently recorded on the blockchain, auditors can spend more time investigating the transaction details that aren’t captured there (e.g. whether a transaction is classified properly in the financial statements).

Asset ownership will likely be recorded on the blockchain – think: art, property and land. This could have implications for asset management, valuation and financial reporting.

And finally, blockchain could lead to automated regulatory compliance. Imagine a world where reconciliation is a thing of the past – and regulators could access and verify all accounting records by reviewing transactions on the blockchain. Or, a world where taxes can be automatically deducted from transactions based on smart contracts between businesses and the IRS.

Of course, these developments would rely on country and state-wide collaboration, buy-in from agencies including the IRS, and industry regulation. But the introduction of blockchain accounting services could give US accountants and bookkeepers more room for advisory, supporting clients with strategic business planning, and growing their own practices.

Build your digital skills with cloud-based accounting software

If this sounds overwhelming – don’t fret – many of these applications are a long way off. But before these futures become reality, accountants and bookkeepers should spend some time researching and learning the fundamental industry applications of blockchain. Look out for industry reports, webinars and talks on blockchain, and invite your peers for conversations about the technology.

It’s important to approach technology with an open mind. According to Xero’s US state of the industry 2025 report, 85% of firms have embraced cloud-based software. This is the first step towards building the digital skills that will make future technologies, including blockchain, more accessible and transformative for practices.

Adopting cloud-based, AI-powered accounting software can help you increase practice efficiencies while growing confident with the latest technology. Xero accounting software can already support you with compliance tasks and practice management, so you can handle practice and client tasks in one secure place.

Blockchain in accounting FAQs

What is blockchain accounting software?

Blockchain accounting software enables you to manage transactions on the distributed ledger, and take care of compliance tasks.

Software already exists for tracking these types of transactions on the blockchain. It works by importing financial data from distributed ledger technologies, so that accounting tasks can be performed using these records.

How does blockchain improve accounting?

Blockchain accounting has the potential to increase efficiency by automating record-keeping, improving security and transparency so that auditing is easier, and enabling faster payments through the use of smart contracts.

Use cases are in their infancy and speculative. But based on existing applications of the technology, we know it could speed up audits and reduce manual errors, as well as improve the reliability of the ledger.

What are blockchain accounting services?

Blockchain accounting services help businesses adopt or manage blockchain-based accounting tasks. For example, a client could require help with coding and reconciling crypto asset transactions stored on the blockchain. Or, a client might be curious about using the blockchain for business transactions, and require support with implementation.

What should accounting firms know about blockchain accounting?

A swathe of new tools that focus on blockchain, distributed ledger technology, and crypto assets have joined the market. Many of these blockchain accounting startups integrate with accounting software, allowing users to track and manage crypto assets and related accounting tasks. Check out the Xero App Store to see what apps integrate with Xero.

How can my firm get started with blockchain and accounting?

Start by learning about distributed ledger technology. Look out for resources from industry bodies that focus on accounting applications – such as AICPA resources and webinars. And keep an eye out for updates on US regulation around the use of blockchain and cryptoassets.

If the technology holds promise for your client base, it could be worth exploring blockchain tool demos and integrating them with your existing accounting software.