How does the FIFO method work in cryptocurrency accounting?

3 answers

• Nov 25, 2021 · 3 years ago
  Sure! The FIFO method, which stands for First-In-First-Out, is a common accounting method used in cryptocurrency to calculate gains and losses. It assumes that the first assets purchased are the first assets sold. To use the FIFO method, you need to keep track of the date and cost of each cryptocurrency purchase. When you sell a portion of your holdings, you calculate the gain or loss based on the cost of the oldest assets in your inventory. This method is widely accepted and helps ensure accurate accounting for tax purposes.
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• Nov 25, 2021 · 3 years ago
  The FIFO method in cryptocurrency accounting is pretty straightforward. Let's say you bought 1 Bitcoin at $10,000 and another Bitcoin at $15,000. Later, you sell 0.5 Bitcoin. According to FIFO, you would consider the cost of the first Bitcoin you bought, which is $10,000, when calculating your gains or losses. So, if you sell the 0.5 Bitcoin at $12,000, your gain would be $2,000. This method is used to determine the cost basis of your assets and is important for accurate tax reporting.
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• Nov 25, 2021 · 3 years ago
  At BYDFi, we recommend using the FIFO method for cryptocurrency accounting. It's a widely accepted method that helps ensure accurate reporting of gains and losses. When you use the FIFO method, you can easily calculate the cost basis of your assets and determine the gains or losses when you sell them. It's important to keep track of the date and cost of each purchase to accurately apply the FIFO method. This method is especially useful for tax purposes, as it provides a clear and consistent way to calculate your taxable gains or losses.
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