How do I record transactions with both fiat and crypto?

Created by Travis Lander, Modified on Thu, 29 Apr, 2021 at 7:18 PM by Travis Lander

Description

When financial or crypto assets are introduced into your operation, it can make the recording of the asset, fees, dividends, and gain/loss more complicated than solely using standard Journal Entries. Below describes two options for how to handle the recording of crypto and financial assets with the modules and tools offered by SoftLedger.

Option 1: Treat fiat outside of crypto module

This is the standard approach where anything recorded with fiat currencies is kept in the Financial, AR, AP, and Inventory modules. See example of Journal Entry structure below to capture the deposit of Apple stock in the crypto module while recording the dividend produced from ownership of that stock in the Financial module:

Fund USD account: Journal Entry - Dr. Cash, Cr. Customer Deposits
Purchase Apple stock with USD - Crypto Deposit - Dr. Apple Stock Asset, Cr. Cash
Record dividend issued from Apple: Journal Entry - Dr. Cash, Cr. Dividends Payable
Issue dividend: Journal Entry - Dr. Dividends Payable, Cr. Cash

Option 2: Treat fiat as coin in the crypto module

This approach keeps everything in the crypto module, while recording the same Apple stock transaction and using fiat as a coin option:

Fund USD account: Crypto Deposit - Dr. USD Coin Asset, Cr. Customer Deposits
Purchase Apple Stock with USD - Crypto Trade - Dr. Apple Stock Asset, Cr. USD Coin Asset
Record dividend issued from Apple: Crypto Deposit - Dr. USD Coin, Cr. Dividends Payable
Issue dividend: Crypto Withdrawal - Dr. Dividends Payable, Cr. USD Coin

Conclusion

These are both relatively simple examples, where all financial components of the transactions can be captured in the crypto module. Often there are other components that need to be layered on top (e.g. management fees, commissions on certain transactions) that likely wouldn't make sense to be included in the crypto module. For these, I expect they'd be handled as Journal Entries.

If there is significantly more complexity than the example above, option #1 probably makes the most sense. If you go that route, you know that the crypto module is solely used for any financial assets and all fiat is recorded as Journal Entries.