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Cryptocurrency is nowadays becoming a robust financial backbone for businesses.

This digital, decentralized financial alternative to traditional centralized finance leverages the potential of financial technology innovations to help businesses maintain financial health. 

The value of cryptocurrency for businesses is increasing for many reasons. 

Many corporate whales are putting cash into this fintech innovation on their balance sheet. 

Tesla is the best example. Uber is also likely to accept Bitcoin for rides. 

This financial revolution is likely to affect businesses in many ways.   

Businesses will need to value understanding the concept of crypto accounting in-depth. 

Do you want to get the full bang of time and money spent on grabbing this concept? 

We suggest you get the hang of it to the core to achieve this incredible feat. 

What is it?  

Alan Chen

Free 30-Min Strategy Session

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

Crypto accounting is the process of recording cryptocurrency transactions. 

The process helps store all types of relevant data to help sort, retrieve, summarize, and present the results of every transaction in all reports and analyses. 

Most people mistake crypto accounting and bookkeeping to be the same. Crypto bookkeeping is an essential part of crypto accounting processes and practices. 

The difference between the two:

Let us save your time. We have already told you about crypto accounting above. 

Crypto bookkeeping helps businesses record and track their cryptocurrency transactions. 

The list of your company’s accounting principles and supporting documents like bills, receipts, invoices, and purchase orders play an important role in crypto bookkeeping. 

 Crypto bookkeeping:



  • Crypto bookkeeping records crypto transactions. 
  • It is to ensure crypto debits and credits. 
  • It is to prepare cryptocurrency-related financial statements. 
  • It helps process crypto payrolls. 

  Crypto accounting:

 

  • Crypto accounting reviews and analyzes statements related to crypto transactions. 
  • It is to perform crypto audits. 
  • It is to prepare adjusting entries related to cryptocurrency transactions. 
  • It helps report and file tax returns related to cryptocurrency transactions. 

Are you leveraging the potential of this digital decentralized financial technology-based revolution? 

 Do you want to account for it? 

 Many such questions must be popping inside your brain. 

 You need to know many more things before we get to the point. The list includes but is not limited to the following:

 

  • The latest FASB guidelines. 
  • Crypto reporting problems with existing standards of accounting. 
  • The process for businesses to record crypto and other assets in their ledger.
  • The way your business should record cryptocurrency payments to vendors.
  • The process for your business to record activities related to cryptocurrency mining activities.
  • The way of treating cryptocurrency trading in your ledger.
  • Will your financial statements and reporting for tax not align. 
  • What types of crypto transactions can GAAP and IFRS tax your business for?
  • For which crypto transactions does your business not get taxed?

Let us answer all of these things for you and make crypto accounting for your business a cakewalk. 



  • Latest FASB guidelines:

Reporting related to virtual decentralized financial assets does not comply with existing accounting principles of GAAP (Generally Accepted Accounting Principles). 

For this reason, GAAP does not address common issues related to crypto accounting. 

Many CPAs (Certified Public Accountants) are bringing this to the attention of FASB (Financial Accounting Standards Board).

They want the board to address this issue on priority and issue new guidelines dedicated to this new class of assets.

Members of Congress and the Chamber of Digital Commerce have also raised their voices to support CPAs through letters to the Financial Accounting Standards Board).

FASB issued an invitation to comment during June 2021 to allow parties to voice their opinions about its new agenda.

There is no guarantee that cryptocurrency and virtual assets will earn their place on the formal agenda of FASB.  



  • Crypto reporting problems with existing standards of accounting. 

There are some crypto reporting issues with current accounting standards. Take a good look at the list of those issues below:

 

  • Frequent changes in value.
  • Difficulty in reporting intangible assets.
  • The recording of losses.
  • No recording of gains. 

These issues need to be solved quickly. 

 

  • Process for businesses to record crypto and other assets in their ledger. 

Businesses can record a debit to the account of an asset and recognize it on their balance sheet at its fair market value. Do it on the date of purchase. Do the opposite at the time of selling the asset. 



  • The way your business should record cryptocurrency payments to vendors. 

Do you pay your vendors in the form of cryptocurrency? 

In this scenario, businesses should record transactions in the same way as if they decided to sell cryptocurrency available in their account. 

It will be counted as disposal. 

Finally, recognize capital gains to determine the difference between the following: 

 

  • The expense
  • Book value of the digital asset. 

 

  • The process for your business to record activities cryptocurrency mining activities.

Businesses should post their cryptocurrency mining activities onto the ledger just like the rest of the activities are posted. 

 

  • First, credit your income account related to cryptocurrency mining. 
  • Second, all new cryptocurrency assets generated on your book should be debited at fair market value. 

This approach will help you record your cryptocurrency mining-related activities. 

 

  • The way of treating cryptocurrency trading in your ledger.

Record all your crypto trading activities the way you record all your stock trading activities. 

Credit your cash account and debit the new cryptocurrency account to record your investment in the ledger. 

Make the required journal entries to the account to deal with impairments. These impairments occur because of the following::



  • Debiting the loss account. 
  • Crediting the asset account.

 

Credit the asset account at book value and debit the account representing the consideration received in exchange for trading a virtual decentralized asset away. Businesses achieve this feat through asset removal from the books at the time of cryptocurrency investment’s disposal. 

Debit the entire cash account if your company sells crypto for FIAT. 

You must debit your new cash account if you exchanged your existing crypto for a new crypto asset. 

Finally, balance the transactions as necessary. Accomplish the task by plugging the difference between one of the following: 

 

  • Capital gain
  • Loss account

 Finally, the task is accomplished. 

 

  • Will your financial statements and reporting for tax not align. 

This could happen for many reasons. The possibility of such a situation is 100%. The credit goes to the difference between the following:

 

  • Accounting rules for your financial statements.
  • Rules for reporting from the taxation perspective. 

Some credit also goes to unrealized losses that you have to record as journal entries according to the existing rules of IFRS and GAAP. 

 

  • What types of crypto transactions can GAAP and IFRS tax your business for?

 

Multiple activities are responsible for it. These activities bring your business under the income tax brackets. Your business may have to pay income tax as per the fair market value generated by the date of receipt. 

Mining income, cryptocurrency staking, hard forks, airdrops, and interest earnings fall into the category of such crypto activities. 

 

  • What type of crypto transactions does your business not get taxed for?

The purchase of crypto with FIAT currency, giving someone cryptocurrency as a gift or donation, and the transfer of like-for-like digital decentralized financial assets between exchanges do not become tax liabilities for businesses. 

Do you want to know more about it?

This is merely the tip of the entire iceberg! Let us know if you are fishing for the best crypto accounting services for your business. 

Our team has the experience and skills to help you maintain the financial health of your business and leverage the potential of this technology-based financial innovation and revolution to the fullest. 

 Are you thinking about it? 

We are here to help you.

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Alan Chen

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