How to Report Crypto Trading Gains and Losses on Your Balance Sheet

Key takeaways

• Properly accounting for crypto assets on your balance sheet is essential for accurate tax reporting and financial transparency.
• Crypto trading activities should be recorded like stock trading, at fair market value on the day of purchase.
• In some countries, like the US, crypto losses can offset gains, so keeping track of gains and losses is important for reducing taxable income.
• Whether you’re an individual investor or a business, treating cryptocurrencies as assets and documenting them ensures compliance with tax laws and minimizes the risk of errors.

Let’s be real, it’s easy to lose sight of what you’ve actually gained or lost, especially when it comes to crypto and its market volatility and frequent trading activities. 

And when it comes to accounting, especially in countries like the United States, it gets trickier because you must reflect those numbers properly on your balance sheet. 

If you are running a business that involves crypto or you are just a crypto investor, understanding how to account for your digital assets correctly is crucial. 

This guide breaks down the basics of balance sheets, handling crypto gains and losses, and what tax implications you need to account for.

What is a balance sheet, and why is it needed?

Think of a balance sheet as a report of your financial health. It shows what you own, owe and what’s left over at a specific point in time. It contains three main parts: 

• Assets: What the company owns, such as cash, crypto, real estate, inventory, etc.
• Liabilities: What the company owes, such as loans, unpaid bills and taxes
• Equity: What’s left after subtracting liabilities from assets (net worth).

For example, if you own $50,000 worth of crypto, and at the same time, you owe someone $20,000. In this case, your equity is $30,000. 

Balance sheets help you understand your financial position at a glance. They’re essential for filing taxes, attracting investors, applying for loans and complying with regulations. 

Balance sheets are essential in countries like the United States, where businesses must report crypto holdings accurately for tax and compliance reasons. Similarly, in the UK, European countries and Canada, balance sheets are important for businesses and are often used by individuals, especially when dealing with crypto assets. 

It’s not just for taxes. A well-maintained balance sheet can help you get funding, plan your finances, or simply sleep better knowing where you stand at night.

How do you treat crypto on a balance sheet?

One of the most common questions when preparing a balance sheet is, “How to report crypto trading gains and losses on a balance sheet?” 

In most jurisdictions, the crypto reporting and taxation rules are still to be decided or clarified. This also applies to the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), which lack definitive guidance concerning cryptocurrency accounting.

As cryptocurrencies are considered assets in many jurisdictions, the fundamental concepts of accounting for assets could apply when preparing a balance sheet involving crypto transactions. 

Below is an example of a simplified crypto balance sheet treatment and some helpful pointers that may assist you in accounting for crypto trading in 2025.

Notes to the balance sheet:

1. Cash ($15,000): Represents fiat currency (e.g., USD) held in bank accounts or wallets, including proceeds from selling crypto or other revenue.
2. Cryptocurrency ($20,000): Recorded at cost basis (fair market value at acquisition, less any impairment). Includes 0.5 Bitcoin (BTC) purchased at $30,000 each ($15,000 total) and 10 Ether (ETH) purchased at $500 each ($5,000 total). No impairment has been recorded, assuming the fair market value (FMV) remains above cost.
3. Mining equipment ($5,000): Capitalized cost of crypto mining hardware, net of depreciation. The original cost was $8,000, with $3,000 accumulated depreciation over two years.
4. Accounts payable ($2,000): Unpaid bills (e.g., for electricity or supplier services related to crypto mining operations).
5. Taxes payable ($1,500): Estimated tax liability for realized crypto gains (e.g., from selling 0.1 BTC at a $2,000 gain, taxed at 20% long-term capital gains rate for simplicity).
6. Retained earnings ($36,500): Accumulated profits, including crypto-related income (e.g., mining revenue, realized gains) minus expenses and taxes. Reflects net income from prior and current periods.

When buying cryptocurrency with fiat money

When you buy cryptocurrency with fiat money, such as dollars or euros, you’re simply exchanging one type of asset, such as cash, for another, like crypto or stocks. On your balance sheet, cryptocurrency trading activities should be recorded similarly to those of stock trading activities. 

As with stocks, you should record cryptocurrency on your balance sheet at its fair market value on the day of purchase. While your cash account displays a credit for the same amount, the…