Understanding How Blockchain Technology Makes the Use of Virtual Money Possible

Blockchain technology is a method that makes it possible for Internet users, to send and/or receive money without need to use a third party infrastructure. Using a specific blockchain application and by way of cryptography, money remains confidential and virtual for as long as transfers are made and recorded in the open ledger of a blockchain platform.

 

 

The blockchain platform supplies the “private key” or the verification code needed by each transacting party, either as a cryptocurrency sender or recipient. Without a private key, the cryptocurrency cannot be transferred or recorded in the blockchain ledger. The inclusion of a private key encryption therefore, renders the cryptocurrency transaction valid.

Correlated to the “private key” is the “public key,” the latter being the open cryptographic message generated by the blockchain application to identify every cryptocurrency transactions recorded in its blockchain ledger. A blockchain cryptograph entry therefore represents the public key and a valid private key.

How the Blockchain Platform Records and Links All Related Cryptocurrency Data

The blockchain ledger is open as it allows verification of transactions as they occur.

A specific blockchain recording, starts by linking the origin of the cryptocurrency in use. The original cryptocurrency transaction may be related to the purchase of the virtual money for a specific value using actual cash. The virtual money may have originated from a cryptocurrency exchange platform or cryptocurrency wallet provider.

Another origin of a specific cryptocurrency is when a miner earns it by solving all transactions connected in a particular blockchain ledger.

In both cases, a public key to identify the original transaction is generated, while the procurer or miner receiving the cryptocurrency will obtain a “private key.” If a portion or all of the original cryptocurrency received will be sent to another blockchain platform user, the private key encryption of the new owner will be recorded in the blockchain ledger.

The new recipient will likewise receive his or her own “private key,” as it gives the recipient valid authority to use the cryptocurrency for his or her own blockchain transaction.

In every blockchain transaction, the public key identifying the cryptocurrency transaction must come with a corresponding “private key,” to allow confirmation that the transaction is connected to a particular series of blockchain entries.

A cryptocurrency may be in bitcoin denomination or any other type, classified as alternative coins to the widely used bitcoin. Some examples of alternative coins or altcoins are Ethereum,Litecoin, Ripple, Dash and Cardano.

How to Convert Cryptocurrency into Actual Cash?

Still using cryptography, virtual money or cryptocurrency can be converted back into actual cash through a cryptocurrency exchange platform. The platform may be one that belongs to a third party cryptocurrency broker or a peer-peer network of cryptocurrency users.

The commutation of virtual currency into actual cash will again be recorded as a related part of the series of blockchain transactions; tying it up to the initial blockchain entry identifying the method of how the cryptocurrency was obtained. Once the public key and the private key has been verified through the blockchain platform, actual exchange of cryptocurrency into cash will be allowed to take place.

Understanding the Essence of the Cash Flow Statement as Part of Financial Reports

Preparing a Cash Flow Statement has become an integral part of the financial reporting system. Aside from presenting reports on how much a business entity earned as Net Income and of its Net Worth for a given period, it has been mandatory since 1987, to provide information by way of a Cash Flow Statement on how business funds were obtained and used rationally.

Business owners therefore must require periodic submission of an Income and Expense Statement, a Balance Sheet and a Cash Flow Statement. That way, the summarized results of business operations and administration are available for periodic review and analysis, in order to determine impact, progress, and for pinpointing areas that need improvement.

Components of a Cash Flow Statement

Simply stated, a Cash Flow Statement (CFS) presents a summary of how much funds entered the business, and of how much of those funds were used during the period.

The CFS is structured in a way that will reflect how the end-of-period Cash and Cash Equivalents reconcile with the Net Income after all funds generated and disbursed for Operational Activities, Investing Activities and Financing Activities, and other non-cash elements have been taken into account.

Cash Equivalents by the way refer to short term investments held by a business, as they can be easily sold and converted into cash at any given time.

Cash Flow Coming from Operational Activities

In this section, the CFS presents the total revenues earned by the business entity throughout a period, purely derived from operating the business, whilst mainly using the entity’s assets. In addition, this section also shows how much of the revenues generated were used in paying off related operational and administrative costs for the same period.

Non-cash values such as depreciation, accruals and unearned portion of revenues occuring during the period of operation will likewise be presented in this section, but as reconciling items.

Cash Flow from Investment Activities

Investment earnings pertain to funds generated thru non-operational activities but still involving the assets of the business; such as selling of long-term assets like property and equipment, as well as earnings collected from maturing investment ventures like marketable securities and other cash equivalents.

In the same way, any amount used in purchasing property and equipment, including software, and/or placed as investment in marketable securities shall be reflected under this section.

Cash Flow from Financing Activities

Financing funds increase the size and composition of the business capital or equity, like those obtained from borrowings including funds acquired by way of bonds, or from issuances of additional shares of stocks.

On the other hand, other factors may change the composition of the business capital, like repayment of borrowings including interests, and/or payment of dividends.