As we float in virtual space ever more than before, there is no way to go away from the humdrum of virtual currency, braving the cyber world which humans will in course of time accept and move on, now in midst of all the cryptic codes which was a while ago only in good read fiction books of famous writer, has now become reality and the famous cryptocurrency bitcoin is all based on cryptography as it is highly secured, and cannot be counterfeited.
Any transaction taking place has to be accountable somewhere in your mind, books and in case of an organization, in your balance sheets, how Do I account for the new virtual transaction? The accounting fraternities are up to handle the accounting for the new set of challenging transactions digitally.
What are Bitcoins?
Publically available digital money which is created by Miners: who with the use of very high power computer networks and complex mathematical permutation have created the currency which has a string of cash or equivalent value. In the United States, they are highly regulated and are monitored keenly owning to the involvement of black money pumped into the system and crashing the exchanges worldwide. The bitcoins move from the online mobile wallet which is either stored in the computer, cloud or the storage space in the mobile phones and are valued higher than gold and physical; money with the price of 1 bitcoin touching as high as $ 2000.
How to account for?
For tax purposes and Federal law, certain guidelines are in place, which may seem confusing to account for at first; however, once it falls in the radar is accounted and considered as:
- the market value is always considered for the cryptocurrency and, is a taxable income when it is used as a mode of payment for goods and services
- there is no gain or loss in the currency as it is done in traditional physical money
- the fair market value of the cryptocurrency arrives at the date when it is acquired in terms of US dollar value in the exchanges
- Bitcoins are treated as income in the 1120 Form and all the expenses incurred during the financial year are deducted to arrive at a taxable income, all the regulatory compliance has to be compiled and adhered to while treating them as income
- virtual loss can be incurred when the bitcoins are purchased at a very high rate during the peak markets, which cannot be considered for taxation purposes,
- The value at which the cryptocurrency is received and the spent could be different which is recorded as a gain or loss.
The receivables part in the cryptocurrency world has to be clearly sorted to avoid recording the transactions and keep track of the dual accounting impacts on the set of transactions.