Standard accounting procedure

[jborkl]

https://docs.google.com/spreadsheet/ccc?key=0AndZm7GH6-UzdE1jRjFnX0J3aFNRdUlhYUp5X0xUdWc


There is no standard accounting in Bitcoin, so we as a community need to develop one to keep people honest.

1. Equipment is USD, so exchange rate needs to be accounted for - so people don't skim
2. Company money needs to help in a second wallet/funds are not to be mixed. - publish the wallet and balance information to be verified
3. Outstanding shares/float needs to be kept current
4. Expenses need to be kept/accounted for in current exchange rate

This needs work but I see that people are asking for it.

My hashrate formula is really weird. I need help with that - I Frankensteined it together

I tried to put it all on one sheet, people lose interest if it is complicated.

The best type of accounting is easy accounting.

I used figures from Bakewells IPO- these are not correct and need to be adjusted once people put in some suggestions/work

[EskimoBob]

Company shares? If you mean Co's own shares, the those are called treasury stock.

Treasury Stock:
The portion of shares that a company keeps in their own treasury. Treasury stock may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations.

Look up cash flow statement. There is no need to invent the wheel
https://www.google.ee/search?q=cash+flow+statement

Same for all the other statements, that give full picture of what's going on.
Publishing only portfolio holdings is not enough.

[EskimoBob]

here is a nice statement of what is going on:

FAQ

Q:
What is the link to your public spreadsheet?
A:
Check https://docs.google.com/spreadsheet/pub?key=0AkzS_thDsmwudHVKcFdMRXg5cjY3eklqNmxHeGlIeXc&single=true&gid=0&output=html (beta-version)

[jborkl]

Ok,  we'll that looks great right off the bat.

Why don't you promote people using that?

And btw I know what treasury stock is, the problem is people are using their own rules on here.

[bitcoinbear]

There should definately be more stringent reportin for companies around here. It would be nice if the GLBSE had a way to publish financial statements. It would also be nice if people around here used standard financial statements. It does not have to be too complicated, there should be a (monthly, quarterly, yearly, as specified in the asset) statement showing profit, loss, current assets, current liabilities, outstanding shares. Why should bitcoinland be different than other places? we should be given the same statements using the same rules for accounting.

[paladon]

I would gladly help if needed. To make reporting more transparant.

[SgtSpike]

No need to reinvent the wheel here people.  Use GAAP.  It exists for a reason, and there's no reason it doesn't apply to business conducted using Bitcoins vs business conducted using other financial instruments.

The only item in your list that GAAP doesn't apply to is #2.  And to that, I really don't even understand what you are requesting.  Company funds are not to be mixed?  Mixed with what?  Why?

[kjj]

No need to reinvent the wheel here people.  Use GAAP.  It exists for a reason, and there's no reason it doesn't apply to business conducted using Bitcoins vs business conducted using other financial instruments.

The only item in your list that GAAP doesn't apply to is #2.  And to that, I really don't even understand what you are requesting.  Company funds are not to be mixed?  Mixed with what?  Why?

In the real world, mixing personal and corporate funds is called commingling.  It lands you in prison, typically.

[SgtSpike]

No need to reinvent the wheel here people.  Use GAAP.  It exists for a reason, and there's no reason it doesn't apply to business conducted using Bitcoins vs business conducted using other financial instruments.

The only item in your list that GAAP doesn't apply to is #2.  And to that, I really don't even understand what you are requesting.  Company funds are not to be mixed?  Mixed with what?  Why?

In the real world, mixing personal and corporate funds is called commingling.  It lands you in prison, typically.

If that's what he meant, then I agree, unless the person is on the sole-propriety level of business.  If they are actually incorporated, then yes, the funds absolutely need to be kept separately.  If they are a sole-proprietor or equivalent, they can mix their funds between business and personal.

[jborkl]

I did mean personal and company funds need to be separate.

Being on a exchange means public company to me, so funds need to kept apart.


If hardware is paid for in USD or expenses incurred in USD then a exchange rate needs to accounted for at the time the expense is incurred.

$80 electric bill being paid for by shareholder operating expenses needs to be $80/Gox last at the time of the bill

If expenses are in Yen, then Yen/GOX.

A mining company should have to report operating equipment and the hash rate it operates at.

What if someone says 100 ghash farm but they are only outputting 80 ghash?

That is not a viable business, that is taking money from the future to pay dividends today.

It is very easy to show what your output is

[bitcoinbear]

No need to reinvent the wheel here people.  Use GAAP.  It exists for a reason, and there's no reason it doesn't apply to business conducted using Bitcoins vs business conducted using other financial instruments.

The only item in your list that GAAP doesn't apply to is #2.  And to that, I really don't even understand what you are requesting.  Company funds are not to be mixed?  Mixed with what?  Why?

In the real world, mixing personal and corporate funds is called commingling.  It lands you in prison, typically.

If that's what he meant, then I agree, unless the person is on the sole-propriety level of business.  If they are actually incorporated, then yes, the funds absolutely need to be kept separately.  If they are a sole-proprietor or equivalent, they can mix their funds between business and personal.

If you are listed on the exchange you are no longer on the level of sole-proprietor.

If people want to invest somewhere that mixes business and personal funds, they can go to The Bank of Dank.

[bitcoinbear]

A mining company should have to report operating equipment and the hash rate it operates at.

What if someone says 100 ghash farm but they are only outputting 80 ghash?

That is not a viable business, that is taking money from the future to pay dividends today.

It is very easy to show what your output is

If they say they produce 100 ghash and only actually produce 80, then that would be lying. I am not sure how to stop lying? How do you show what your output is to prove it?

[jborkl]

Simple screenshot from a pool.

Last 10 rounds

Payout screen

Transactions coming into the company account matching the transaction out from the pool.

I can think of many ways to prove output beyond a reasonable doubt.

[SgtSpike]

I did mean personal and company funds need to be separate.

Being on a exchange means public company to me, so funds need to kept apart.


If hardware is paid for in USD or expenses incurred in USD then a exchange rate needs to accounted for at the time the expense is incurred.

$80 electric bill being paid for by shareholder operating expenses needs to be $80/Gox last at the time of the bill

If expenses are in Yen, then Yen/GOX.

A mining company should have to report operating equipment and the hash rate it operates at.

What if someone says 100 ghash farm but they are only outputting 80 ghash?

That is not a viable business, that is taking money from the future to pay dividends today.

It is very easy to show what your output is

Yes, I agree.  I suppose I should have just continued with the implied assumption of the conversation being about companies with shareholders.

Regardless, the currency conversion things you mentioned are covered by GAAP.  Companies (even Bitcoin-based ones) should follow GAAP, and shareholders should demand GAAP compliance by companies before investing in them.

Shareholder should also demand transparency (i.e., visibility of hashing power).  Real-world companies misrepresent their actual production figures all the time, and they are kept in check via independent auditors.  Therefore, shareholders of Bitcoin-based companies should demand either periodical independent auditing or reliable ways of verifying that the company is actually producing what it says it is producing.

[jborkl]

If hardware is paid for in USD or expenses incurred in USD then a exchange rate needs to accounted for at the time the expense is incurred.

The expense is incurring with depreciation!
There is a cashflow, but that is not an expense!
But that should be easy. When you convert BTC into a fiat on an exchange, you automatically have an exchange rate.

Correct, but what shareholder protection is there in the current system?

Since the exchange rate is variable, what exchange rate is being used- if not specifically stated?

How many dollars did the company get for our Bitcoins?  This is a very big question if a large number of Bitcoins is involved.

1000X11.50? or 1000x12.80?

[jborkl]

I did mean personal and company funds need to be separate.

Being on a exchange means public company to me, so funds need to kept apart.


If hardware is paid for in USD or expenses incurred in USD then a exchange rate needs to accounted for at the time the expense is incurred.

$80 electric bill being paid for by shareholder operating expenses needs to be $80/Gox last at the time of the bill

If expenses are in Yen, then Yen/GOX.

A mining company should have to report operating equipment and the hash rate it operates at.

What if someone says 100 ghash farm but they are only outputting 80 ghash?

That is not a viable business, that is taking money from the future to pay dividends today.

It is very easy to show what your output is

Yes, I agree.  I suppose I should have just continued with the implied assumption of the conversation being about companies with shareholders.

Regardless, the currency conversion things you mentioned are covered by GAAP.  Companies (even Bitcoin-based ones) should follow GAAP, and shareholders should demand GAAP compliance by companies before investing in them.

Shareholder should also demand transparency (i.e., visibility of hashing power).  Real-world companies misrepresent their actual production figures all the time, and they are kept in check via independent auditors.  Therefore, shareholders of Bitcoin-based companies should demand either periodical independent auditing or reliable ways of verifying that the company is actually producing what it says it is producing.

We are getting somewhere here--

The point is we are supposed to be a self regulated community. If someone wants to be taken serious, they should have to submit to some simple community auditing and regulation.

This will reduce scams, increase profit and therefore increase the future value of Bitcoin

[SgtSpike]

We are getting somewhere here--

The point is we are supposed to be a self regulated community. If someone wants to be taken serious, they should have to submit to some simple community auditing and regulation.

This will reduce scams, increase profit and therefore increase the future value of Bitcoin

Yes, I agree.  I would be very unlikely to invest in a company that is not holding to GAAP standards and is not being regularly audited, or at least very transparent with their reporting.  Unfortunately, most of the community does not hold to those sorts of standards, thus the companies do not feel the need to conform to GAAP or audit requests.  If this thread is a call to action for investors to demand more transparency in these areas from companies prior to investing in them, then I wholeheartedly agree.  Not much can be done besides just talking about it, but hopefully even that will make progress in this area.

The cashflow report should list that in detail.
It is a mandatory part of accounting.

I think you are afraid, that an operator could manipulate USD/BTC to his advantage.

An operator should write his invoices in USD, e.g. if he paid for the electricity in USD.
The company then will compensate him in USD if it has still reserves.
If not the company can convert BTCs into USD and pay out.

If the operating costs are charged on a regular - predetermined date/time, it would also be possible to pay out BTC with a reasonable exchange rate like MtGox/USD from the predetermined date/time.

But that would only be a best practice, I'm not sure if it is reasonable to regulate this so much in detail.

I am not terribly familiar with GAAP in regards to foreign currency, but what you just described doesn't sound like GAAP at all.  I would expect revenues/expenses to be recorded in the base currency (i.e., USD) at the time that the revenue/expense is incurred.  Any further fluctuations between the time that the revenue/expense is incurred and the time that the exchange is actually made to/from the base currency would be accounted for separately, as something like a gain/loss on currency conversion.

[smickles]

NO.

We should be using GAAP or IAS.

Coming up with our own standards will undoubtedly lead to confusion, scamming, and any number of other bad things.

[bitcoinbear]

NO.

We should be using GAAP or IAS.

Coming up with our own standards will undoubtedly lead to confusion, scamming, and any number of other bad things.

Well stated.

[jborkl]

It is a call to action then

When a exchange listed fund can pass a simple group audit and it makes sense I will invest.

Basic common sense accounting and proof of work.

If someone wanted to do it right, it should be a normal part of business anyway.