Accounting question

[K~Ehleyr]

I don't know how anybody else manages their crypto accounting but I have a spreadsheet for each coin I own, and each time I buy/sell, I log into my spreadsheet the date, the exchange used, the amount of coin and the corresponding value of fiat.  At the bottom I have formulae to calculate the totals so I can keep track of how much of each coin I have, how much fiat it cost me, etc... and I also have separate formulae to show me the average fiat spend per coin and also to show the notional profit/loss any time I update the coin valuation.  So far all good, it works.

However, today, I traded one coin for another (BTC to altcoin) and I'm looking for advice on how I should manage the fiat value in my accounting.  I would have matched the amount of BTC I exchanged to an original BTC purchase and used the same fiat value, effectively reversing that transaction and putting the same cash value to the alt instead, but on this occasion I don't have any corresponding BTC purchase I can match it to.  So how do I assign a fiat value to the operation?  I could take the mean average of my BTC spending to date..., I could apply today's valuation... though I don't know whether I'd take the alt/BTC or the alt/fiat...

How do more experienced traders do this?

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[jjacob]

You need to decide on a functional currency - Is it going to be fiat or bitcoin? Going by your description, I think it will be fiat.
If that is the case, think of buying alts with bitcoins as a 2 step transaction. You sell bitcoins for fiat and then use this fiat to buy alts.

[K~Ehleyr]

Thank you for your reply!  Yes, I have to use fiat (EUR) as my base currency for now.  The two-step transaction makes a lot of sense.  How would you determine the exchange rate?  I guess the BTC-Euro rate at the time of the exchange to alt?  Or at least a best estimate if I miss the order going through.

[pearlmen]

If I get you right based on your last response its about getting the right exchange rate to use or is it that you want to do cross exchange of Fiat currencies?

Thank you for your reply!  Yes, I have to use fiat (EUR) as my base currency for now.  The two-step transaction makes a lot of sense.  How would you determine the exchange rate?  I guess the BTC-Euro rate at the time of the exchange to alt?  Or at least a best estimate if I miss the order going through.

[Maverick69]

Do you know http://www.cryptofolio.info/ and https://cointracking.info/ ?

[K~Ehleyr]

Do you know http://www.cryptofolio.info/ and https://cointracking.info/ ?

Thank you, those look useful!  I'll check those out properly  

If I get you right based on your last response its about getting the right exchange rate to use or is it that you want to do cross exchange of Fiat currencies?

Yes, I want to use the right exchange rate to keep my accounts as accurate as possible, I'm only using the one fiat currency and that's Euro.  I have it straight in my head now that the altcoin exchange rate doesn't matter, because that's predetermined by the amount of altcoin I end up with and the euro value I assigned to the Bitcoin "sale" on the other side of the transaction.  I just need to establish the best method of calculating that euro value, whether that means taking the value from the original purchase price of BTC (probably too much room for manipulation since I could decide those are the coins I bought at €500 or €980 or anywhere in between ), the average purchase price of all my BTC (presently about €760) or from the exchange rate of the day (~€840).

Especially looking at those figures, the exchange rate of the day seems to be the way to go.  My aim is to record the amount of euros I have invested in each coin as accurately as possible, both for my own profit/loss control and for taxes, etc.

Does it sound as though I'm on the right lines?

[chanbtc]

Yes, I want to use the right exchange rate to keep my accounts as accurate as possible, I'm only using the one fiat currency and that's Euro.  I have it straight in my head now that the altcoin exchange rate doesn't matter, because that's predetermined by the amount of altcoin I end up with and the euro value I assigned to the Bitcoin "sale" on the other side of the transaction.  I just need to establish the best method of calculating that euro value, whether that means taking the value from the original purchase price of BTC (probably too much room for manipulation since I could decide those are the coins I bought at €500 or €980 or anywhere in between ), the average purchase price of all my BTC (presently about €760) or from the exchange rate of the day (~€840).

I think you ought to be as honest as possible in calculating the original purchase price of BTC, otherwise it is not very meaningful to do your accounting.

Should not take the average unless you purchased the same amount of BTC every time.

[jjacob]

Thank you for your reply!  Yes, I have to use fiat (EUR) as my base currency for now.  The two-step transaction makes a lot of sense.  How would you determine the exchange rate?  I guess the BTC-Euro rate at the time of the exchange to alt?  Or at least a best estimate if I miss the order going through.

Yes, the BTC-Euro rate (from any exchange) would have to be used. If you miss the time of the order going through, an estimate would be sufficient.
If you know the time of the transaction, there are exchanges which give you detailed minute by minute graphs of historical bitcoin prices. Of course, if you aren't finicky, you don't need those.