Smart ledger: The blockchain‐based accounting information recording protocol

• Published date: 01 October 2021
• Author: Yuqian Zhang,Saeid Pourroostaei Ardakani,Wenqi Han
• Date: 01 October 2021
• DOI: http://doi.org/10.1002/jcaf.22515

Received:  June  Accepted:  August 

DOI: ./jcaf.

RESEARCH ARTICLE

Smart ledger: The blockchain-based accounting information

recording protocol

Yuqian Zhang1Saeid Pourroostaei Ardakani1Wenqi Han2

University of Nottingham Ningbo China,

Ningbo, Zhejiang, China

Crown Institute of Higher Education,

Sydney, New South Wales,Australia

Correspondence

YuqianZhang, University of Nottingham

NingboChina, Ningbo, Zhejiang, China.

Email:Yuqian.zhang@nottingham.edu.cn

Abstract

Blockchain technology has the potential to reduce transaction errors and

enhance the quality of reporting significantly. This article proposes a conceptual

blockchain-based protocol, labelled Smart Ledger,as a replacement for the tradi-

tional accounting information recording system. A smart ledger is a computer-

ized algorithm that utilizes blockchain technology to perform accounting ledger

functions. Its validity is based on two mechanisms within the blockchain archi-

tecture: Fractional Accounting Transactions(FAT) and Hierarchical Accounting

Transaction Execution (HATE). As such, the smart ledger is a hybrid protocol

that combines accounting information recording principles with the immutabil-

ity of blockchain technology. If widely implemented, it could have a significant

impact on accounting practices and the accounting profession.

KEYWORDS

accounting information, blockchain, fractional accounting transaction, hierarchical account-

ing transaction execution, smart ledger

1 INTRODUCTION

The term “blockchain” refers to a distributed ledger tech-

nology (DLT) that originated in computer science. A

blockchain stores data in the form of blocks that are

sequentially added to the chain (Swan, ). What distin-

guishes the blockchain as a novel concept is its tamper-

resistant nature—all data contained within the block is

preserved and immune to modification (Krause et al.,

). The blockchain’s temperature resistance is possi-

ble because each block references uniquely identifies the

previous block using a cryptographic signature, thereby

forming an unbroken, sequential, and timestamped chain

(Bambara et al., ; De Filippi & Wright, ). This

feature can assist in lowering the monitoring costs and

risks associated with opportunistic behavior (De Filippi

& Wright, ). Within a relatively short period of

time, blockchain concepts such as FinTech, Cryptocur-

rency, DLT, and Smart Contracts have gained popular-

ity. Numerous blockchain-based applications have been

implemented in various industries, including banking,

logistics, supply chain management, and pharmaceuticals

(Kokina et al., ).

The development of blockchain technology represents

a paradigm shift in the way accounting information

systems are viewed. Some argue that blockchain tech-

nology enables the triple-entry accounting system to

address concerns about trust and transparency (e.g.,

Cai, ; Dai & Vasarhelyi, ). Additionally, there

is a discussion regarding the potential application of

blockchain technology in auditing (e.g., Liu et al., ;

Schmitz & Leoni, ) and accounting system (e.g., Tan

& Low, ). Notably, several studies have investigated

the possibility of architecting blockchain protocols that

integrate with accounting information systems (Søgaard,

;Wang&Kogan,). However, the lack of a

uniform standard to which developers of blockchain

systems and accounting professionals should adhere is

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