For the last few years, the world of cryptocurrency has taken off like a rocket. From being a niche market to becoming a household name, it has come a long way. In fact, this fast growing industry will continue to grow at a rapid pace for the foreseeable future. To continue profiting from this growing market, you will need to have a handle on the fundamentals of accounting. As a crypto company, you will need to keep track of your finances in a way that’s compliant with the law. Even though there are many accounting services for crypto companies, you should choose the right one for your company and needs.
What is Accounting?
Accounting is the record keeping process used to determine financial viability and make business decisions. It is what most people think of when they hear the word “accounting“.
Traditional Accounting vs. Crypto Accounting
The way you keep track of your finances will differ depending on your industry. For example, an accounting firm that works with a legal cannabis business will likely have a different set of financial records than a travel booking website. However, many of the principles between these two different accounting practices are the same.
The fundamentals of what will keep you compliant with the law are the same between these two accounting practices. You will record your financial transactions accurately, keep a proper accounting book, and report your financial data to regulatory authorities. Essentially, you will be doing the basics for your business’s compliance.
You should also keep in mind that even though you are using cryptocurrencies for your company’s transactions, you still need to follow certain accounting guidelines. This includes recording your financial transactions accurately, keeping a proper accounting book, and reporting your financial data to regulatory authorities. It is just that instead of using dollars or Euros, you will be keeping track of your cryptocurrency transactions.
How to Record Financial Transactions
There are many ways to record your financial transactions, but you will find the most success if you keep the following points in mind:
- Keep a record of all your incoming and outgoing transactions.
- Make sure to mark all your transactions as either “cash” or “related party”.
- Document all your expenses such as cash purchases, employee salaries, and stock acquisitions.
- Keep proper accounting books for all your transactions.
- Report your financial data to regulatory authorities.
- Track your financial records via an accounting software.
How to Balance your account
As your business grows, so will your cash flow needs. When your checking account doesn’t have the necessary funds to pay your bills, you are said to have a “negative cash flow”. You should keep a checkbook just like regular businesses to keep track of your cash flow.
There are a few things you should keep track of in your account:
- Your current cash balance.
- Your total monthly cash flow.
- Your monthly bills and payments.
- Your monthly net profit/loss.
- Your monthly debt repayment schedule.
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