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Bitcoin Accounting – Calculating Your Sales Income

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You won’t need a notebook such as this for Bitcoin accounting. A spreadsheet will suffice.

Has Bitcoin accounting ever crossed your mind as troublesome? Just like regular income accounting, Bitcoin accounting is a must, whether your company is based in Germany, Egypt or Hong Kong (or anywhere else, except for the U.S. in our case).

So how do you calculate your income if some, most, or all of your invoices are paid with bitcoins, rather than typical fiat currency?

Well, to issues that concern Bitcoin accounting, our answer is quite simple. CoinGate pays out to your bank account the exact amount of EUR/USD that your merchandise costs (minus 1% processing fee). We make this possible by locking the Bitcoin conversion rate at the time of purchase. In essence, this removes the need for any custom accounting for your Bitcoin sales. Consequently, if you receive payouts from CoinGate in EUR/USD, you should account for all purchases as for regular payments. Take the following example:

  1. Your customer buys 100$ worth of merchandise on your website or retail store (and pays with bitcoins).
  2. You receive 99$ from us by bank transfer (100$ minus 1% fee).
  3. Your process of accounting for this transaction is the same as for any other incoming bank transfer.

To sum up, when you receive payouts in fiat currency, Bitcoin accounting is the same as any other incoming bank wire accounting. Essentially, the process is very similar or identical to the process you undergo with your Credit Card Processor.

In addition, just to stay safe, keep track of your customer, order and invoice IDs associated with Bitcoin payments. You can find this information, as well as the exchange rate of bitcoins at the time of purchase, on CoinGate invoices and in your CoinGate account dashboard.

What about accounting when you keep the bitcoins from your sales?

If you receive payouts from us in bitcoins, accounting for your sales may get somewhat trickier. The rule of thumb: your accountable income is equal to the market value of bitcoins at the moment you received them. However, the exact rules for Bitcoin accounting will depend on how you local authorities interpret Bitcoin. Because Bitcoin exchange rates are highly volatile, it is worth taking record of the average real-time/daily values of your sales. When compiling reports, you can aggregate your Bitcoin sales volumes and average exchange rates to produce a realistic result of what your Bitcoin sales were worth in fiat currency in real-time. Of course, for comprehensive Bitcoin accounting, like with regular fiat sales, keep at hand your customer, order and invoice IDs.

Furthermore, if you keep the bitcoins from your sales, please duly take note of the following. If you decide to sell your bitcoins for fiat currency some time in the future, and the exchange rate of Bitcoin has risen, you may be accountable to pay taxes for the difference in the value increase, i.e. the capital gains. The amount of taxes may vary by your country of residence; under specific circumstances, you may not have to pay taxes at all.

We very much hope that this information will help you out. We endorse Bitcoin as a contemporary currency that allows global payments while maintaining integrity and openness as its core values.

The article above is neither financial nor tax advice. Most of the information here was derived from the resources at BitcoinWiki, while the rest – from our own experience. If you need help with accounting and paying taxes for your Bitcoin sales, do consult a specialist financial officer.