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Accounting for Bitcoin

6th Nov 2017
Brought to you by
capium

Capium is cloud based accounting and practice software.

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Once considered to be a currency exclusively used for illegal trade, the bitcoin has now become mainstream with more than 100,000 retailers currently accepting it all over the world.

As bitcoin becomes increasingly popular in different transactions, more accountants and businesses wonder how to account for them.

At the moment, there is no official guidance, so businesses and accountants need to use their own judgement to find out what is appropriate. However, with trading with cryptocurrencies such as bitcoin becoming more popular over time, the guidelines will likely evolve and we might end up having a proper accounting standard for bitcoins.

In the meantime this short guide, it can be useful when accounting for transactions involving bitcoin:

Cash equivalent or financial assets

Bitcoin are often being regarded as a cash equivalent or a form of cash. This would make the accounting process very easy. However, bitcoins shouldn’t be accounted as cash as it can be converted to any form of currency, but they are not cash themselves. Also, the value of cash changes over time, while bitcoin remain practically the same.

Likewise, bitcoin cannot be regarded as a financial asset.

Gold or other commodities

Bitcoin can be treated as an intangible asset, like gold, or an inventory based on the business that holds them.

If we treat them as a commodity, they would need to be measured at the value of services or goods at the time of transaction, which in most cases would be measured at a cost minus any impairment. If the entity, however, is a bitcoin trader, it would be better to measure the bitcoin at a fair value using the ideal of profit and loss. 

Would you like to have more information about accounting for cryptocurrencies? Get in touch with us.

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