According to a survey by New York Digital Investment Group, 46 million Americans own some form of cryptocurrency. If you're an accounting pro, you’re likely starting to see cryptocurrency in your practice. Your clients might be requesting your assistance in bookkeeping for crypto. Perhaps you’ve been using QuickBooks Online (QBO) for a number of years and it's been reliable.
But there's a problem.
Legacy accounting software like QuickBooks does not natively support crypto assets. The process for categorizing crypto in QuickBooks can take five times as long compared to traditional assets.
We developed Gilded as a solution for accounting professionals looking to integrate crypto with the business tools they already use. It’s possible that you’ve been directed to Gilded from QuickBooks itself. Or perhaps you haven’t even attempted bookkeeping for cryptocurrency, and you’re looking for a place to start.
In this article, we’ll explore two ways to categorize crypto in QuickBooks — manually or with Gilded's enterprise crypto accounting software.
What you need to know about QuickBooks and crypto
Accounting and blockchain follow the same logic
Blockchain can be understood as a system of triple-entry bookkeeping. It exists on a ledger system that automatically calculates transactions as they take place in real-time. If you send a quantity of bitcoin (or some other kind of digital asset) to your friend, the transaction will appear on a public ledger. Unique numerical hashes will represent your wallet and the wallet of the person you’re transacting with.
Blockchain is advancing the field of accounting as transactions populate in real-time. But that's not the end of it. Raw blockchain data lacks context and block explorer links do not provide accounting grade information. That's where crypto accounting software comes in — allowing you to enrich, classify, and tag crypto transactions and create a journal entry in QuickBooks.
One of the most important features of crypto accounting software is the ability to organize financial information in a clear way. This can mean a customizable dashboard, the ability to map contacts, the option to manage multiple crypto wallets, and integrations with accounting software like QuickBooks Online and Xero. As you optimize your crypto to QuickBooks workflow, the more time you’ll have to focus on actually advising your clients.
Does QuickBooks handle cryptocurrency?
Gilded was created as a direct response to the problems that accounting professionals encountered when trying to account for cryptocurrencies.
In attempts to categorize crypto for QuickBooks, there were clear limitations. First, QuickBooks only recognizes two decimal places, but crypto transactions can sometimes require eight or more to maintain precision. There are workarounds, but until you’ve attempted it on your own, you won’t fully understand how difficult it can be to organize your digital assets in QuickBooks.
That's why it's important to create your own wallet. Try your hand at exchanging assets, and learning about crypto transactions on your own. Trade cryptocurrency or NFTs, so you’ll learn how transactions work by inspecting them on the blockchain with a block explorer like Etherscan.
Accounting for crypto volatility
There are overlaps between bookkeeping for traditional assets and doing the same for crypto. Generally, you’re going to account for and balance your books as you would with conventional assets. But with volatile digital currencies like bitcoin and ethereum, you'll have to account for those price fluctuations.
Bitcoin is still in price discovery, so its value is constantly changing. It's not uncommon for the price of one bitcoin to fluctuate by thousands of dollars in a single day. Although you won’t have to account for every change in bitcoin’s price, you’ll need to reference its price each time you buy, sell, or create a bitcoin transaction in whatever capacity.
If you’re making thousands of transactions, bitcoin will ultimately have a different value for each transaction. Without a deliberate system in place, this has the potential to become dysfunctional.
Additionally, there are a number of different kinds of transactions that can take place on the blockchain. Whether you’re mining crypto, staking, minting NFTs, or some other kind of transaction, it’s important that you’re knowledgeable on the best way to account for these different kinds of transactions in QuickBooks Online.
How to manually categorize crypto in QuickBooks
The process of accounting for cryptocurrencies in QuickBooks Online will have overlaps with the way you account for other assets.
If you are accepting crypto and recognizing revenue in the form of digital assets, you’ll want to have an asset account for your crypto holdings that’s separate from your bank accounts. Likewise, expenses paid using cryptocurrencies should be shown as a credit to those accounts — but, you’ll need to track them in your base currency. This will require conversions prior to creating entries.
It will be helpful for you to create a general ledger account to best track this information.
How do I add crypto to QuickBooks?
QuickBooks Online doesn’t have a standard way to account for cryptocurrencies. Your best choice is to maintain your own record of this information on a separate ledger sheet.
You can keep notes in the memo section, including the names and quantities of the assets you're transacting but it’s more than likely you’re performing enough transactions to make this impractical.
You’ll also want to maintain a ledger account for your gas fees. Although it’s possible to track these fees on-chain, you should dedicate a separate account, since it’s considered a qualified business expense. You’ll want to create a record for each outgoing transaction.
An Excel spreadsheet and QuickBooks Online might be a match made in heaven. But it’s still not quite enough when trying to do your bookkeeping for cryptocurrencies.
How to categorize crypto in QuickBooks with Gilded's crypto accounting software
You know how to categorize crypto in QuickBooks manually, but there's an easier way.
With Gilded, there are basically three steps. After you log in, you’ll click add an account — this is where you connect your digital wallet to Gilded. At this point, your digital assets, as well as your entire history of transactions will begin to load onto your Gilded account. This information will be saved and will be accessible each time you log into your account.
Your portfolio of digital assets and transaction history will be available to use with a variety of payment and accounting tools. This includes bitcoin, Ethereum, Polygon, and a variety of other cryptocurrencies.
Whether you’re processing a tax return, accounting for crypto holdings, paying your team, or simply bookkeeping for cryptocurrency — by using Gilded, you’ll be able to bypass a number of time-consuming steps.
Rather than having to calculate every change in value by hand, Gilded’s interface will run the numbers for you ready for you to code, streamlining your entire accounting process. Gilded's robust spot pricing engine ensures the numbers are correct.
Using Gilded’s Compass add-on, you’ll be able to automate transactions and customize your financial reporting in a few clicks. Compass is the most advanced crypto integration for QuickBooks, and we’re happy to share it with you.
Although it's possible to categorize crypto in QuickBooks without a third-party application, Gilded makes the process infinitely easier.
There’s no denying QuickBooks Online is an accounting powerhouse. Our respect for the application is demonstrated by the fact that Gilded is built upon the foundation created by Intuit. But even the most powerful tools have limitations.
QuickBooks Online simply doesn’t scale as a crypto accounting software. You’ll be able to bookkeep for cryptocurrency — at least, to a certain extent. But if you want to become adequately immersed in the emerging digital ecosystem, we have to recommend Gilded.
Gilded leverages the organizational capacity of QuickBooks Online to make categorizing cryptocurrencies an intuitive process. Whether you’re looking for crypto mining accounting software, a way to organize data for your NFT collection, or something else, we've got you covered.
Want to join our network of trusted crypto accounting professionals? Learn more about Gilded's accounting partner program.
Founded in 2018 by a team of developers and CPAs, Gilded believes that the future of finance is global, open, and powered by blockchain. Our mission is to onboard the next million businesses to web3 by providing the financial tools to succeed in this new reality. Backed by Techstars and the Association of International Certified Public Accountants (AICPA), Gilded powers operations for companies building in web3.