Using Bitcoin With QuickBooks- Revaluing Your Wallet And Converting To Cash
This is the second part of a multi-part series that will explain how to employ bitcoin as a payment method using QuickBooks or any similar small business accounting package.
Accounting principles generally accepted in the United States and state and federal regulatory authorities require reporting in US Dollars. Other countries have similar requirements. This procedure will allow you to properly account for your bitcoin sales and integrate those sales into your business records as if they had originally be made in your home currency.
There are multiple ways to perform most tasks in QuickBooks. Manual journal entries are used for this illustration, but the general idea would be the same for a “split” transaction using a QuickBooks register.
Revaluing Bitcoin Wallets Using Journal Entries
You will need to record changes in the value of your bitcoin wallet from time to time to account for variations in the exchange rate, sending and receiving small amounts that aren’t sales or purchases (tips, for example), and service charges. General journal entries must have two equal parts- a debit and a credit. The debit and credit amounts must balance. That is, the sum of the debits and the sum of the credits must be equal for each transaction or QuickBooks will not allow the transaction to be saved and posted.
1. Select “Make General Journal Entries” from the “Company” menu.
2. From the account menu on the general journal entry screen, you will select two accounts- the Bitcoin Wallet other asset account and the Bitcoin Exchange Gains income account that you created earlier.
3. To increase the balance, post a debit for the amount of the increase to your asset account and an equivalent credit to your income account. To decrease the balance, post the decrease amount to your income account as a debit and an equivalent credit to your asset account. For example, the journal entry for a $100 change in the value of your Bitcoin holdings will look like this:
Account Debit Credit
Bitcoin Wallet $100 For Increase
Bitcoin Exchange Gains $100
Account Debit Credit
Bitcoin Exchange Gains $100 For Decrease
Bitcoin Wallet $100
Converting Bitcoin Holdings To Cash
You can use another journal entry to convert between bitcoin and cash. You will need to account for any fees that you pay for the exchange. This example assumes a $1 transaction fee, accounted for using a service charge general ledger account, but you can create a new general ledger account for this if you prefer. The journal entry will look like this:
Account Debit Credit
Cash (or Bank Account) $100 Conversion to cash
Bank Service Charges $ 1
Bitcoin Wallet $101
Account Debit Credit
Bitcoin Wallet $100 Conversion from cash
Bank Service Charges $ 1
Cash (or Bank Account) $101
Feel free to contact us with feedback, questions, or requests.
Go back to Recording Sales And Accepting Payments. Go forward to Paying Vendors.
This article originally appeared in Bitcoin Magazine during the autumn of 2013.