Accounting Theory Summative Assignment Sample

Introduction: Accounting Theory Summative

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Background

Cryptocurrency is stated as the form of digital currency which is treated as an alternative form of making payment. These cryptocurrencies are made using encryption algorithms and are used both as a currency and as a virtual accounting system. It is a type of digital payment system which does not involve any bank or financial institution for governing it. This system is made with a peer-to-peer system and does not require any person's presence for sending or receiving money. The first currency which was created was Bitcoin and this was created in the year 2009 and till date, it is the best currency which is used. There is a decentralised system attached to the cryptocurrency and as a result, this is very cheap and fast while transferring the money. It is also treated as a strong medium of exchange and storage. This is particularly because of the reason that it is dependent on a public ledger technology which is d blockchain (Blockchain Technology is Evolving Conventional Accounting Systems, 2020). This blockchain is used to record the data and to keep track of every transaction with the help of the network. This blockchain is also a virtual chain which includes a block for every transaction. Further, this block becomes immutable which implies that information recorded within that block cannot be replaced or changed. Thus, it will be saved for a longer period and no other person can make changes within that block.

It is also seen that the use of cryptocurrency is much beneficial for the use. This is particularly the reason that in the current competitive environment use of cryptocurrency is very popular. The major benefit of using cryptocurrency is that it is very cost-effective. This is particularly for the reason that this helps in transferring money globally and it does not involve many charges. The transactional cost relating to cryptocurrency is minimal and many times zero. Thus, this eliminates the involvement of any third party and thus, as a result of this the transaction cost is negligible. In addition to this, another benefit of using cryptocurrency is that it completely works on the decentralised method which makes the working much better. This strategy does not include any of the government or any other involvement (Shehada and Shehada, 2020). Thus, as a result of this, the decisions taken relating to it are very fast and the working is also very effective. This is about the fact that when decisions are taken are fast then this will result in better working of cryptocurrency. The current study will outline the evaluation of cryptocurrency and the development of the aim and objective of the study. In addition to this, literature relating to the difference between traditional accounting and the use of cryptocurrency will be made. At the end, the use of different research methods will be outlined which are used to complete the study.

Research Aim And Question

Research Aim

To analyse the conflict present in traditional accounting systems and the development of cryptocurrency and blockchain transaction paradigms.

Research Objectives

• To develop an understanding relating to the concept of cryptocurrency and blockchain and its significance.
• To evaluate the differences between traditional accounting and cryptocurrency which necessitates the development of new accounting guidelines.
• To examine the challenges faced while implementing cryptocurrency and the use of blockchain.
• To recommend some of the ways through which the application of cryptocurrency can be improved.

Research questions

1. What is the concept of cryptocurrency and blockchain and its significance?
2. What is the difference between traditional accounting and cryptocurrency?
3. What are the challenges faced while implementing the use of cryptocurrency?
4. What are the different recommendations through which the use of cryptocurrency can be improved?

Significance of the study

In the current competitive environment, the use of cryptocurrency is very high and because of this, it is very popular. Thus, the current research topic is of significance because it will help the user of cryptocurrency to enhance knowledge relating to it. There are many different issues relating to cryptocurrency which need to be evaluated. Thus, the current study will help in analysing those issues and try to increase awareness relating to cryptocurrency (Brukhanskyi and Spilnyk, 2019). This present study is also of significance to the people who are undertaking the use of cryptocurrency as this study will help them to increase their knowledge relating to it and how cryptocurrency creates an impact on accounting standards and practices. Along with this, the current study is also of significance to the other researchers who are conducting the study on similar or related topics.

Rationale of the study

In earlier times, the exchange of money was taking place with the help of currency notes only. But with the help of digitalisation, the use of online transfer of money has increased to a great extent. Thus, with this, the use of cryptocurrency has also increased to a great extent. This is particularly because of the reason that this currency is used in order to transfer from one place to another and it does not involve any physical involvement of money (Wang and et.al 2021). Thus, the major reason for the selection of the current research topic is that it includes many different negative impacts on the accounting system. Thus, the current study will help users understand the concept of cryptocurrency and the issues and problems associated with using this. The current study is selected for the reason that it will help in analysing the issues which are attached to the use of cryptocurrency. Along with this, it current topic was also selected because it was of personal and academic interest to the researcher.

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Literature Review

Theme 1- Understanding relating to cryptocurrency and its significance

In the views Aliyev, (2022) cryptocurrency is referred to as a form of digital currency which is used for making payments. These are the volatile assets which have the potential to earn high gains. It is a medium of exchange which is operated with the help of a computer network. This system is not managed and operated by any of the government authorities or the bank. Rather it is operated by a system which is d blockchain. The data is computerised and with the help of strong cryptography, the transactions are secured. The security of transactions is very necessary because in case it is not managed then it can result in loss for the users. This currency is not present in the physical form and is not issued by any of the central authority and rather is decentralised.

On the other hand, Bian, Lin and Xiong, (2021) argued that for managing this cryptocurrency the use of distributed ledger technology is made and it is d blockchain. This blockchain serves as the database for managing public financial transactions. With the secondary research, it is clear that the first cryptocurrency was founded in the year 2009 d Bitcoin and currently there are more than 25000 different cryptocurrencies. The major significance of the use of cryptocurrency assists in combatting the monopoly of money and tries to make online working more popular. Along with this another significance of the use of cryptocurrency is that it will help in lowering the transaction charges which is levied in case of normal money transaction from banks and other financial institution.

Theme 2- Difference between traditional accounting and cryptocurrency

In the opinion of Liu, Tsyvinski and Wu, (2021) the use of cryptocurrency and blockchain creates a negative impact on the working of the traditional accounting system. The first and foremost impact created by the use of cryptocurrency over the traditional accounting system is that it creates issues relating to storing the data. Within the conventional accounting system, all the data is recorded and stored in a centralised format. This can be stored within any of the accounting software or the spreadsheet. Here the accountant and the auditor have access to these centralised records and can use the data anytime. On the other side, in the case of blockchain the recording system is decentralised and the record is maintained within the distributed ledger which has access to all the related parties. But the only thing is that the ledger is immutable which means that once the detail is recorded then it will not be changed. Hence, with this, the data recorded cannot be modified and as a result of this, the records will be kept clear and better.

On a contradictory note, Baba and et.al., (2021) argued that the use of cryptocurrency can also be included in the accounting. This is particularly because, in accordance with the IAS 38, the cryptocurrency might fall within the category of intangible asset. But many people argue this because this is not present in physical format and as a result of this it can create issues within the accounting. In addition to this another major difference between traditional accounting and the use of cryptocurrency is that traditional accounting includes the use of multiple intermediaries and as a result of this the cost of the company increases and the chances of errors also increase. But in the case of the use of cryptocurrency, it is not present. This is particularly for the reason that there is no involvement of an intermediary and as a result of this, the work is very fast and effective. Hence, ultimately it creates a positive impact over working as there is not any involvement of increased cost.

Theme 3- Challenges faced during the use of cryptocurrency

According to Fu and et.al., (2023), there are many different challenges faced by users while using cryptocurrency. This is pertaining to the fact that the cryptocurrency does not include the involvement of any government authority or regulatory body. Thus, as a result of this, there are high chances of theft and fraudulent activities. This creates issues regarding the working of the cryptocurrency and it may have a negative impact on the working of the currency and its accounting as well. In addition to this, Aliyev, (2022) criticized that another issue attached to the use of cryptocurrency is that there might be a lack of understanding relating to the use of this. It is particularly for the reason that there are many different complex things attached to the use of cryptocurrency. Thus, in case these changes will not be managed then it will be affecting the working of the currency. In addition to this, another challenge faced while working with cryptocurrency is that there is a lack of a regulatory framework. This creates issues because when the regulatory framework is not present then proper guidance and structure for working will not be present and as a result of this the working will be affected.

Research Design

Research type

The type of research is defined as the method through which the study is completed and the objectives are attained. There are two different methods through which research can be accomplished that is qualitative and quantitative study. The qualitative is the one which includes undertaking only the theoretical knowledge relating to the research topic (Hendren and et.al., 2023). On the other side, quantitative is the one which includes undertaking all the facts and figures and numeric information relating to the research topic. In order to complete the current study, the use of qualitative type of research will be made. This is particularly used for the reason that it includes focusing on theoretical details relating to the study.

Research approach

The research approach is defined as the reasons for selecting any of the procedure of research. The two approaches which are used to buy the researcher include inductive and deductive approach. With regards to the current study based on analysing the difference between the traditional accounting system and the use of cryptocurrency the use of inductive approach will be made. This is particularly selected because this approach helps the researcher in setting up of aim and objective with will provide a base for the completion of the whole research.

Research philosophy

The research philosophy is defined as the beliefs and values which underlies the selection of the different research methods for completion of the study. In general there are two different philosophies that is interpretivism and positivism which can be used by the researcher (Vaughn and Jacquez, 2020). In order to complete the current study use of interpretivism will be made by the researcher. This is particularly selected because this philosophy is most suitable in case of a qualitative study.

Data collection

Without the use of effective data the study cannot be accomplished. Hence, as a result of this proper data needs to collected relating to the research topic. The data can be collected from two different sources that are primary and secondary. In order to complete the objectives of the current study that is difference between the traditional accounting system and the use of cryptocurrency use of secondary source will be undertaken. The reason for selection of the secondary data is that it provides a wide range of theoretical data relating to the research topic. This data can be gathered from different books journal articles and other published sources.

Data analysis

After the collection of the data the most essential aspect is to analyse the gathered data. This is particularly necessary because in case the gathered the data will not be evaluated effectively then it will affect the attainment of the objective. The data can be evaluated with help of two different methods that is thematic analysis and by using SPSS (Strijker, Bosworth and Bouter, 2020). In order to accomplish the objectives of current study use of thematic analysis will be made. This is particularly used because it helps the researcher in formulating different themes and then evaluating the secondary sources relating to the them.

Research limitation

Research limitation includes the factors which negatively impact the working of the study effectively. The major limitation which the research of faced while conducting the study over comparison of traditional accounting system and use of cryptocurrency was limited time. The time provided for the completion of the study was very less but then also be researcher with good time management skill tried to manage it and completed before time. In addition to this another limitation included limited resources. The resources provided for the study was Limited and the users were many which affected the completion to a great extent. But with good allocation skills the researcher tried to manage the study within the limited resources and attain the objectives of the study.

Ethical consideration

For the successful completion of the study it is necessary that effective ethical considerations are followed. With regards to it the researcher has undertaken the use of all the latest data and not to old data is used (Harris and et.al., 2019). Along with this another ethical aspect considered by the researcher is that data is gathered from proper copyright source are used in order to collect the data. These copyright sources provide the authentic information relating to the research topic which makes the study more effective and appropriate.

References

Books and Journals

• Aliyev, A.G., 2022. Study of Development Trends and Application Risks of Cryptocurrency and Blockchain Technologies in the Digital Environment. Informatica Economica, 26(3).
• Baba, A.I., Neupane, S., Wu, F. and Yaroh, F.F., 2021. Blockchain in accounting: challenges and future prospects. International Journal of Blockchains and Cryptocurrencies, 2(1), pp.44-67.
• Bian, Y., Lin, X. and Xiong, Y., 2021, December. The Progress of Cryptocurrency Assets Investment from Financial Perspectives: Risks, Comparisons and Impacts. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 33-38). Atlantis Press.
• Brukhanskyi, R. and Spilnyk, I., 2019, June. Cryptographic objects in the accounting system. In 2019 9th International Conference on Advanced Computer Information Technologies (ACIT) (pp. 384-387). IEEE.
• Fu, Q., Lint, D., Cao, Y. and Wu, J., 2023, May. Does Money Laundering on Ethereum Have Traditional Traits?. In 2023 IEEE International Symposium on Circuits and Systems (ISCAS) (pp. 1-5). IEEE.
• Harris, D.E., Holyfield, L., Jones, L., Ellis, R., Neal, J., Harris, D.E., Holyfield, L., Jones, L., Ellis, R. and Neal, J., 2019. Research methods. Spiritually and developmentally mature leadership: Towards an expanded understanding of leadership in the 21st century, pp.57-65.
• Hendren, K., Newcomer, K., Pandey, S.K., Smith, M. and Sumner, N., 2023. How qualitative research methods can be leveraged to strengthen mixed methods research in public policy and public administration?. Public Administration Review, 83(3), pp.468-485.
• Liu, Y., Tsyvinski, A. and Wu, X., 2021. Accounting for cryptocurrency value. Available at SSRN 3951514.
• Shehada, F. and Shehada, M., 2020, July. The challenges facing IFRS for accounting of cryptocurrencies. In The 1st International Conference on Information Technology & Business ICITB2020.
• Strijker, D., Bosworth, G. and Bouter, G., 2020. Research methods in rural studies: Qualitative, quantitative and mixed methods. Journal of Rural Studies, 78, pp.262-270.
• Vaughn, L.M. and Jacquez, F., 2020. Participatory research methods–Choice points in the research process. Journal of Participatory Research Methods, 1(1).
• Wang, J., Chen, P., Yu, S. and Xuan, Q., 2021. Tsgn: Transaction subgraph networks for identifying ethereum phishing accounts. In Blockchain and Trustworthy Systems: Third International Conference, BlockSys 2021, Guangzhou, China, August 5–6, 2021, Revised Selected Papers 3 (pp. 187-200). Springer Singapore.

Online

• Blockchain Technology is Evolving Conventional Accounting Systems. 2020. [Online]. Available through: < https://www.invoiceberry.com/blog/blockchain-technology-evolving-conventional-accounting-systems/ >