How companies account for their crypto assets in their accounting system?

For CFOs and Accounting Firms

Very often, finance teams and accounting firms ask us how they should push data to their accounting systems. The answer is that it depends! It depends on your jurisdiction, on your activity and on the related accounting treatments. Sometimes, several options are possible. 

We have decided to share the knowledge gained through our research and our daily conversations with our accounting partners, and growing client base of over 30 CFOs.

The objective of this article is to give an overview of the different options that a finance director or an accountant has when pushing data to an accounting system and to share insights on why they would decide to choose a given path. In this article, we explore the main processes and the Cryptio’s features’ used by industry-leading crypto native companies and or their Accountants. 

 

1) Pushing each transaction information as individual journal entries 

The most common data format that you can import in an accounting system like Quickbooks or Xero is ledger entries. That being said, writing ledger entries is not an easy process as the reconciliation happens outside the accounting system.

Why would a business use this method?

  • The company wants to book each transaction as a journal entry in its accounting system
  • The company usually accounts their digital assets as non-monetary assets i.e. intangible assets
  • The company does not want the reconciliation to happen within the accounting system. And has already an in-house process to generate these entries. 

2) Importing Batch Journal Entries into an Accounting System

This process consists of aggregating single journal entries into batch entries and import them into your accounting system using manual journal/journal entry imports. Therefore, the challenge is similar: importing journal entries in an accounting system is the most common way but writing these entries could be a long manual process.

Why would a business use this method?

  • The company has a large volume of transactions and they intend to use Cryptio as sub-ledger to push batch Journal Entries to their main-ledger (Quickbooks, Netsuite etc.)
  • The company usually accounts their digital assets as non-monetary assets (i.e. intangible assets)
  • The company would like to save time, by not having to reconcile transactions within their accounting system. And has already an in-house process to generate these entries.

3) Account wallets or exchanges as Bank Accounts 

Often, crypto companies choose to account certain wallets/exchanges as Bank Accounts. In their accounting system, they will have their regular fiat bank accounts (HSBC, Chase..) and they will add also crypto bank accounts. They can chose to have 1 bank account per asset hold (1 for Bitcoin holding, 1 for USDC) but also some use to have 1 general account where they account for all assets. That being said, we have witnessed several times that this method is often complex to maintain.

Why would a business use this method?

  • The company wants to account their digital assets as monetary assets and they use a specific wallet/exchange/asset, to pay for business operations (i.e. payroll, treasury management, paying creditors) 
  • They can match payments with existing invoices and contacts from the accounting system

4) Asset Re-evalution over a defined period of time

This method is complementary to the methods mentioned above. 

Every accounting firms needs to be able to generate a report that contains the evolution of both prices and stock of assets over a period of time (weekly, monthly and or yearly) hold by the company

Why would a business use this method?

  • The company’s accounting firm requires them to provide data on the assets the business holds in order to account for them properly in the P&L and generate accurate financial performance reports. 

Cryptio is a bridge between the Crypto world and traditional accounting software, it consists of all the tools you need to get your data into the company’s main general ledger. Depending on your specific use case the process for pushing data from Cryptio to accounting software may vary.

Today, we introduce the cryptio toolbox 

With the toolbox, CFOs and accounting firms have all the reports and connections they need to automate all their accounting process.

– Automated connection for single ledger entries exports to Quickbooks & Xero. 

Ledger entry csv report to build batch journal entries that could be exported to any accounting system including Xero and Quickbooks.

Bank Statement csv report to be imported in any accounting system including Xero and Quickbooks

Historical Balances csv report to track historical balances, cost basis and stock valuation to support the Asset Re-evaluation Process.

 

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