Trade Journal Entries & Gain/Loss Calculation

How Bitwave Handles Journal Entries for Trades: An Example:

🔢 Step-by-Step Process

Receiving ETH as Revenue
The business earns 2 ETH as part of a sales transaction.

ETH market price at the time is $1,000.

📒 Bitwave Journal Entry (JE):
Account Debit Credit
Bitwave Digital Assets $2,000
Revenue $2,000

Cost basis per ETH: $1,000

No gain/loss is recognized at this stage because it's a revenue event.

Trading ETH for DAI (and Paying Gas Fee)
The company trades 1 ETH for 1,200 DAI:

ETH value has risen to $1,200 at trade time.

Also pays 0.02 ETH as a gas fee (worth $24 at $1,200/ETH).

This trade has realized gains and changes the cost basis.

📊 Realized Gain/Loss Calculation:
a. On 1 ETH traded:

Proceeds = $1,200

Cost Basis Relieved = $1,000

Realized Gain = $200

b. On 0.02 ETH gas fee:

Proceeds = $24

Cost Basis Relieved = $20

Realized Gain = $4

✅ Total Realized Gain = $204

⚠️ Note: Even though Bitwave capitalizes the gas fee into the asset, it still records gain/loss for the gas ETH disposed.

📒 Bitwave Journal Entry (for the trade):
Account Debit Credit
Bitwave Digital Assets (DAI) $1,224
Bitwave Digital Assets (ETH) $1,200
Bitwave Digital Assets (ETH gas) $24

ℹ️ Note: This entry is not pushed to the ERP, since the debits and credits within the Digital Assets account net to zero (no GL impact).

Updating ERP for Realized Gain
Bitwave users must manually post the gain/loss in their ERP based on Bitwave’s gain/loss reports.

📒 ERP Journal Entry:
Account Debit Credit
Bitwave Digital Assets $204
Realized Gain $204

🧾 This reflects:

Increase in digital asset value on ERP.

Recognition of realized gain.

📈 Cost Basis Tracking
Before Trade:

1 ETH @ $1,000 = $1,000

0.02 ETH (gas) @ $1,000 = $20
Total = $1,020

After Trade:

1,200 DAI acquired @ $1.00 = $1,224
Total Cost Basis After = $1,224

🔍 Change in Cost Basis = $204 → Matches the Realized Gain
This tracking is critical for maintaining accurate basis for future disposals.

🧠 Key Takeaways
Realized gains must be tracked even on gas fees.

Capitalizing fees doesn’t remove the need to record disposals.

ERP adjustments for gains are manual based on Bitwave reports.

Bitwave's subledger automation ensures compliance without double-posting to the ERP.