Accounting for Cryptocurrency Mining Operations

[DaveC49]

I think the accounting for bitcoin production would be similar to any other
manufacturing cost accounting although identifying the component costs may
be interesting. If you are running your own hardware to do it then that is
one cost, (depreciation, running costs etc) which will more than likely be
in a conventional currency. If you are using cloud based facilities then you
have the leasing/hire costs, labor costs, indirect costs and overhead costs.
Life would be easier if those costs were in bitcoin itself. It would
probably be better to set up a bitcoin currency and only convert to a
conventional currency on sale or conversion.

In normal cost accounting you would use a Work-in-process Inventory (Asset)
Account to accumulate the value any direct costs (materials, labor) and
indirect costs (overheads), a debit to that account for the value of the
costs over the time period of manufacture.  The accounts for the other side
of these transactions would be either an Accounts Payable (if purchase is on
credit) or a bank account for cash purchases. On completion of the
manufacture, this value would be transferred to a
Finished-Goods-Inventory(also Asset) account.  Any costs in conventional
currency would need to be converted either with a conversion value at the
time of purchase of production needs (or at the time of sale). Local
legislation may affect when and in what form these costs can be recorded.

                                                            Debit                  
Credit
Asset:Work in Progess                                                      
zzzz
Asset:Finished Goods Inventory              zzzz

At the point of sale there are two transactions
                                                          Debit                     
Credit
Expense:Cost of goods sold                   xxxx
Asset:Finished-goods-Inventory                                          
xxxx
Asset:bank                                          yyyy
income:Sales revenue                                                        
yyyy

The difference between xxxx and yyyy is the markup on the cost or the profit
(less any costs associated with sale/trading of the bitcoin). The major
difference will be the comparatively short production time for a bitcoin,
but there will still be costs which can be assigned to its production as
distinct from costs associated with the sale or trading of the bitcoin.  The
above is also a very abbreviated description of cost accounting for
manufacture but does illustrate the basic process behind it.

Bitcoin seems to buy and sell largely like a stock so a trading account may
be the best choice for an asset account to record the bitcoin inventory.

As John mentioned the exact details are going to be determined by the
regulations and legislation (usually primarily tax related) applying in your
jurisdiction. These may govern what costs can be recognised and when you can
recognise costs in your records and what conversion rates may be applied.



-----
David Cousens
--
Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html