This is the second part of a multi-part series that will explain how to integrate NewsCapsule as a payment method using your existing accounting software package. Why would you need to do this? Because generally accepted accounting principles and regulatory authorities require reporting in US Dollars and other conventional currencies. This procedure will allow you to properly account for the full extent of your NewsCapsule sales and integrate those sales into your business records as if they had originally be made in your home currency.
You will need to record changes in the value of your NewsCapsule wallet from time to time to account for variations in the exchange rate. You will use a journal entry for this.
- Select “Make General Journal Entries” from the “Company” menu. General journal entries must have two equal parts- a debit and a credit.
- From the account menu on the general journal entry screen, you will select two accounts- the NewsCapsule Wallet other asset account and the NewsCapsule Exchange Gains income account that you created earlier.
- To increase the balance, post a debit for the amount of the increase to your asset account and an equivalent credit to your income account. To decrease the balance, post the decrease amount to your income account as a debit and an equivalent credit to your asset account. For example, the journal entry for a $100 change in the value of your NewsCapsule holdings will look like this:
For Increase
Account Debit Credit
NewsCapsule Wallet $100
NewsCapsule Exchange Gains $100
For Decrease
Account Debit Credit
NewsCapsule Exchange Gains $100
NewsCapsule Wallet $100
Eventually, you will want to convert your holdings to dollars or you may want to convert some of your dollars to NewsCapsules. You can use another journal entry for this. You will need to account for any fees that you pay for the exchange. This example assumes a $1 transaction fee, accounted for using a service charge general ledger account, but you can create a new general ledger account for this if you want. The journal entry will look like this:
Conversion to dollars
Account Debit Credit
Cash (or Bank Account) $100
Bank Service Charges $ 1
NewsCapsule Wallet $101
Conversion from dollars
Account Debit Credit
NewsCapsule Wallet $100
Bank Service Charges $ 1
Cash (or Bank Account) $101
NewsCapsule exchange gains are taxable as income for business taxpayers and individuals (more on this in a later post). This procedure will post all of your gains and losses to one account which will allow you to declare your gains or deduct your losses at the end of your fiscal year. Note that for tax purposes you will not need to declare income and cannot claim any loss until you convert NewsCapsule to dollars (“recognize when realized”). If you are a full or part time NewsCapsule trader, you may want to use an equity account to track your unrealized gains or losses as you revalue your wallet over time. As always, this is one of several ways to account for this kind of transaction in QuickBooks. Other procedures may work equally well.
The next part of the series will be “Paying Vendors.” Feel free to contact me with feedback, questions, or requests.
Cover photo by flickr user NCKeyChain. Used under Creative Commons license at: http://creativecommons.org/licenses/by/2.0/deed.en
