How do you account for crypto payments?

You account for a crypto payment by recording the token as an asset at its fair value at the moment it arrives, clearing the customer's invoice against that value, and then tracking the token lot by lot until it leaves, so that every later conversion or payment produces a measured gain or loss. Revenue is still the invoice; the token is simply what settled it, and from the minute it lands it is a holding with its own cost, its own carrying amount and its own line in the ledger.

This article follows one ordinary business, not a trading desk, through a full cycle, from an invoice in dollars paid in a token to the conversion into bank money, then covers classification under US GAAP and IFRS, stablecoins, pricing, cost basis, the wallet subledger, the month-end reconciliation and audit evidence. It is general information, not accounting or tax advice: the treatment of your own holdings is a policy to settle with your accountant and, if you have one, your auditor. Tax follows separate rules that differ by country and are not covered here.

What does a business record when a customer pays an invoice in crypto?

A business that receives a token in payment of an invoice records three things at once: the token as a new asset at its fair value at the time of receipt, the receivable as settled, and any gap between the two as a small settlement difference. The sale itself was already recorded when the invoice was issued, in the currency the invoice was written in.

An invoice for $48,000 is $48,000 of revenue whether the customer pays by wire or by token. What changes is the debit side of the settlement entry: a crypto asset account receives the value instead of the bank account. The amount is not assumed to be the invoice total: it is the units received multiplied by the price from your stated source at your stated time. If the customer computed the token amount a few minutes earlier at another price, the two figures differ, and the invoice terms should say whether the customer tops up or whether differences under a stated tolerance go to a settlement difference account.

When the price itself is fixed in tokens, for instance 16 units of ether rather than $48,000, the revenue has to be measured in your reporting currency at a date the revenue standard of your framework determines: settle that with your accountant before the first such contract.

From the moment of receipt, the units form a lot: a quantity, a date and time, a unit cost and a wallet. Measurement, disposal and disclosure all work from lots.

What do the journal entries look like over a full cycle?

Over a full cycle, the entries are: revenue and a receivable at the invoice, a crypto asset against the receivable at receipt, a disposal with a realised gain or loss each time units leave, a remeasurement at month end where the framework calls for one, and a final disposal on conversion to bank money.

The business is an illustrative engineering consultancy that reports in US dollars under US GAAP, holds ether in two wallets (wallet R for receipts, wallet P for payments), uses first in, first out as its cost basis method and remeasures at each month end. All prices are invented for the example. Its invoice terms set a tolerance of 0.5% of the invoice for settlement differences.

On day 12, the client sent 16 ether computed at $3,000, but the price at the time stamp the consultancy uses was $2,990, so the asset enters at $47,840.00 and the $160.00 gap, 0.33% of the invoice, falls inside the tolerance. Receiving cost the consultancy nothing in network fees: on Ethereum the sender pays the fee.

On day 20, the consultancy moved 5 ether from wallet R to wallet P. A transfer between two wallets of the same owner is not a disposal, so the 5 ether keep their lot and their cost. Only the fee of 0.001 ether leaves the business: a small disposal at fair value, and an expense of $3.04.

On day 22, paying a supplier in the token is two transactions in one: a disposal of 3.002 ether at their fair value of $9,156.10, and the settlement of a $9,150.00 payable plus a $6.10 network fee. Under first in, first out, the units come from lot A at $2,990, a cost of $8,975.98, and the difference of $180.12 is a realised gain. On day 30, the 17.047 ether still held have a cost of $51,048.03 and a fair value of $49,436.30 at $2,900, hence the remeasurement loss.

How is the conversion to bank money recorded?

A conversion to bank money is recorded as a disposal of the units sold: the bank account receives the net proceeds, the exchange fee is an expense, the crypto asset account is credited with the carrying amount of the units, and the balance is a gain or loss. When the holding is carried at fair value, that gain is measured from the last remeasured amount, not from original cost.

On day 5 of the next month the consultancy sells 10 ether through an exchange at $3,120, with an illustrative fee of 0.20%. Gross proceeds are $31,200.00, the fee is $62.40 and $31,137.60 reaches the bank. The 10 units come from lot A. Their original cost was $29,900.00, and the month-end remeasurement wrote them down to $29,000.00.

The entry debits the bank $31,137.60 and exchange fees $62.40, credits crypto assets $29,000.00 and credits a gain of $2,200.00. That $2,200.00 is what the second month's income statement shows. Measured against cost, the gain is $1,300.00, because $900.00 of the $2,200.00 only reverses the loss booked at month end. The subledger holds both figures, which is why cost is never overwritten by a remeasurement.

The table stops at the day of the sale; a real close would also remeasure the 7.047 ether that remain. The settlement difference and the fees sit outside the crypto asset result on purpose: one is a cost of collecting a receivable, the other an operating cost.

How are crypto assets classified and measured under US GAAP?

Under US GAAP, a crypto asset that meets six scope conditions is measured at fair value at each reporting date, with the changes included in net income. That is the model set by the Financial Accounting Standards Board in Accounting Standards Update 2023-08, issued in December 2023 and effective for fiscal years beginning after December 15, 2024.

The six conditions, as the update lists them: the asset meets the definition of an intangible asset; it gives the holder no enforceable rights to or claims on underlying goods, services or other assets; it is created or resides on a distributed ledger based on blockchain or similar technology; it is secured through cryptography; it is fungible; and it was not created or issued by the reporting entity or its related parties. Ether held by the consultancy meets all six, which is why the worked example remeasures at month end.

Crypto assets within its scope are shown separately from other intangible assets on the balance sheet, and their remeasurement gains and losses are shown separately from changes in other intangibles in the income statement. In the cash flow statement, the update addresses the ordinary business directly: cash from selling crypto assets that were received as noncash consideration in the ordinary course of business and converted nearly immediately into cash is classified as operating activities. The update describes "nearly immediately" as a short period expected to be within hours or a few days, rather than weeks.

For each significant holding the update asks for the name, the cost basis, the fair value and the number of units; annually it asks for the method used to determine cost basis, a reconciliation of the opening and closing balances showing additions, dispositions, gains and losses, and the cumulative realised gains and losses on dispositions during the period. In the worked month, that reconciliation reads: additions of $60,027.00, dispositions of $8,978.97 at carrying amount, a loss of $1,611.73, and a closing balance of $49,436.30.

How are crypto holdings treated under IFRS?

Under IFRS there is no dedicated standard: a holding of cryptocurrency is accounted for under IAS 2 Inventories when it is held for sale in the ordinary course of business, and under IAS 38 Intangible Assets otherwise. That is the conclusion of the agenda decision the IFRS Interpretations Committee published in June 2019, titled Holdings of Cryptocurrencies.

The Committee reasoned that such a holding is not cash, because cryptocurrencies do not currently have the characteristics of cash, and not a financial asset, because it gives the holder no contractual right. It does meet the IAS 38 definition of an intangible asset: it can be separated from the holder and sold or transferred, and it gives no right to a fixed or determinable number of units of currency. A business that takes tokens in payment and holds them is not holding them for sale in the ordinary course of business in the way a dealer is, so IAS 38 is the usual home. The IAS 2 route belongs to firms whose business is trading the tokens.

IAS 38 has consequences for the month-end entry. As the IFRS Foundation summarises the standard, an intangible asset is usually measured at cost after initial recognition, fair value being available only when it can be determined by reference to an active market, and an intangible asset with an indefinite useful life is not amortised but is tested for impairment annually. On the cost basis, the consultancy's day-30 fall in price is examined as a possible impairment rather than booked as a routine remeasurement, and a later rise above cost is not recognised until the units are sold. The gain reported on the day-5 conversion would differ from the US GAAP figure, though the cash is identical.

Where does a dollar stablecoin sit?

A dollar stablecoin does not have one settled classification: it sits wherever the rights it gives its holder put it, and those rights differ from one token to the next. Neither of the two texts above settles the question, which makes the classification a judgement to document and agree with the auditor.

Start from the scope conditions. The US GAAP fair-value model covers only tokens that give the holder no enforceable rights to or claims on underlying goods, services or other assets. A stablecoin whose terms give the holder a right to redeem it from the issuer for dollars may fail that condition, in which case the fair-value model does not apply and other guidance has to be found. On the IFRS side, the June 2019 agenda decision defined the cryptocurrencies it covered as ones that are not issued by a jurisdictional authority or other party and do not give rise to a contract between the holder and another party. A token issued by a company, with redemption terms, is outside that description, and the analysis starts again: is there a contractual right to receive cash, and against whom?

The questions that drive the answer are factual, and the answers are in the issuer's published terms for the specific token: who can redeem directly, at what value and on what conditions, what the holder can claim if the issuer fails, and whether the token can be frozen.

Which price and which time stamp should you use?

Use one named price source and one stated time convention for every transaction and every close, chosen in advance and written into the accounting policy. The choice matters less than applying it identically each time.

Fair value is the price in a market the business can actually use, at the measurement date. For a widely traded token that means a quoted price from an active market, and the policy names it: the venue where the business converts, or a published reference rate built from several venues. Tokens trade around the clock, so the policy also needs a time. Three conventions are common, each defensible:

• the price at the time stamp of the block that contains the transaction, for receipts and payments;
• a fixed daily cut-off, such as midnight in Coordinated Universal Time, for remeasurement at period end;
• for an immediate conversion, the executed price of the sale itself, which is direct evidence of value.

The worked example used the first for transactions and the second for month end. The policy also states the fallback when the source is unavailable and who may change the source. Each subledger line then carries the price used and where it came from, so that a reviewer can re-perform any valuation.

Which cost basis method should you choose?

Choose first in first out, specific identification or average cost, and apply it consistently: all three allocate the same total cost, and they differ only in which period a gain appears. The Financial Accounting Standards Board's update names those three as examples and requires the method used to be disclosed.

The supplier payment of day 22 shows the difference. The consultancy held two lots, 16 ether at $2,990 and 4 ether at $3,010, less the 0.001 ether fee of day 20, and it disposed of 3.002 ether worth $9,156.10.

The $60.04 spread between the highest and lowest gain does not disappear: it sits in the cost of the units still held. Under a fair-value model the choice does not change total income for the period, since the remeasurement picks up whatever is not realised; it changes the split between realised and unrealised, and the disclosed cost basis.

First in, first out needs only the order of receipts and is easy to re-perform. Average cost suits numerous small lots. Specific identification demands wallet records that prove which units moved. Tax law in your country may require or restrict a method for tax purposes, so the books may need a second computation for the tax return.

How should the crypto subledger be organised?

Organise the crypto subledger as a list of movements per wallet and per token, in units and in reporting currency, with the transaction hash as the document reference for every line. The general ledger then carries one control account per token, and the subledger explains it unit by unit.

A workable line holds: the wallet; the token and the network; date and time in one stated time zone; the transaction hash; the direction; units to the full precision of the token; the price used and its source; the value in reporting currency; the lot created or consumed; the counterpart document, an invoice, a supplier bill or an internal transfer note; and the general ledger account. Fees are their own lines, tied to the same hash.

Two rules keep it clean. Every wallet the business controls is listed in a register with its address, its purpose, who can sign and the date it was opened. And units are the primary record: the dollar column is always derived from units and a price, never typed in.

One situation changes what a receipt means. If you collect a client's whole payment and then pass shares on to subcontractors or co-contractors, the full amount enters your wallet, your subledger and your reconciliation, and whether you report revenue gross or net is decided by your role in the contract, not by the path of the money. Where the parties prefer that each receives its own share directly, a payment router such as Shaka divides one client payment among the parties at the same moment, in one transaction, with the shares set as percentages and signable by each recipient before the client pays; it routes the payment and never holds the funds. Each party then records one receipt, its own, with the same transaction hash as the others.

How do you reconcile the subledger to the chain at month end?

Reconcile by comparing, wallet by wallet, the units the subledger says you hold with the balance the chain shows at the cut-off, then explaining every difference before valuing anything. Units come first because a valuation applied to the wrong quantity is wrong however good the price is.

The differences such a reconciliation finds fall into a few families: receipts nobody recorded, as here; network fees left out of a payment entry; a transfer between own wallets booked on one side only; unsolicited tokens sent to the address; and units recorded on the wrong network. Each is found by matching hashes.

What controls and audit evidence will be asked for?

An auditor asks for evidence of four things: that the tokens exist, that the business controls them, that they are valued at a supportable price, and that every movement was recorded in the right period.

Existence is the easy part, since balances can be read from the chain by anyone at any block. Control is harder: a balance at an address proves nothing about who can spend from it. Expect to demonstrate control, typically by signing a message with the wallet's key or sending a small agreed amount at an agreed time, or, where a custodian or an exchange holds the tokens, by a confirmation from that institution and its own control report. Valuation rests on the price policy, and completeness on the wallet register.

The internal controls behind those answers are ordinary ones:

• separation between the person who prepares a payment and the persons who sign it, with more than one signer above a stated amount;
• a verified address book for suppliers, with any change of address confirmed through a second channel before the first payment;
• a documented procedure for the keys, their backups and the departure of a signer;
• a monthly reconciliation, reviewed and signed, kept with its evidence;
• a dated copy of the accounting policy and of each change to it.

The monthly file that results is short: the wallet register, the subledger extract, the signed reconciliation, the price support for the closing rate, the lot schedule with cost and fair value, and the classification memos, including one for each stablecoin.