Bitcoin accounting for SME's

Making it really easy for non-accountants.

As long term followers will probably remember, Fantastic Nozzles the business, has been accumulating Bitcoin (BTC) on the balance sheet for a while now. The thing that appears to put some otherwise enthusiastic business owners off the idea though, is how to handle the accounting?

The Australian Tax Office has declared Bitcoin to be commodity like wheat or coal and gives you a couple of options in how to account for gains or losses.

Here is how Fantastic Nozzles make the accounting very easy.

Wheat and coal are measured in tons. Big units. One Bitcoin is a big unit as well in price terms. Fortunately one Bitcoin is made up of 100,000,000 Satoshi’s, the smallest divisible unit. In our accounts we break a Bitcoin up into 1,000,000 Satoshi units (1/100th of a Bitcoin) that we call mSats >

At todays Bitcoin price of around $AUD 40,000, that values one mSat at around $400.

If we want to buy 5 tons of wheat, there will be a price per ton. When we want to buy some Bitcoin, we buy it in multiples of one million Satoshi’s - mSats. We account for them like any other inventory item. Each time we buy or sell, we treat mSats no differently to packets of nozzles.

Any accounting or inventory management software can handle that. Cost prices can be averaged within the system if you want. Gains and losses are recorded and accounted for in the same way as any other inventory item.  You can then deal with capital gains/losses or trading gains/losses as appropriate for your business.

That’s how we do it. No need to be stressing out over Exchange Trading Statements!

Accounting for your Bitcoin this way makes it easy to keep a handle on what we at Fantastic Nozzles regard as an important liquid treasury asset and convenient form of un-leveraged capital accumulation.

Regards - Dave

08 6102 5886

PS for Bitcoin maxi’s - We don’t ‘hodl’ and we don’t ‘trade’ in the traditional sense. We sell mSats from time to time for the sole purpose of purchasing more nozzle inventory; and we DCA in weekly.  With this form of ‘trading’ we generally find that Bitcoin’s famous volatility works in our favour once we net our realised and unrealised positions. Bitcoin is a dynamic element within our business operation and we really like it ;)

Disclaimer - This is what we do in our business and is not to be taken as professional or financial advice.

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