How do I create crypto transactions for margin trades?

Created by Travis Lander, Modified on Wed, 7 Jul, 2021 at 6:57 PM by Travis Lander

Description

SoftLedger’s flexibility allows for crypto transactions to be tracked and accounted for in a variety of ways within the platform. This article will specifically address accounting for transactions made by trading on margin.

Creating Transactions for Margin Trades

Regardless of the type of crypto transaction, SoftLedger enables you to record and account for that transaction within the crypto module. As a result of the flexibility offered by the platform, there are several ways margin trades can be tracked and accounted for. Two of those ways are described below and leverage SoftLedger’s flexible chart of accounts.

Option #1 – Tracking in real time

The first of the two methods involves simultaneously creating a deposit in a separately created margin account at the same time that a margin trade is entered into. The deposit in the margin account will be for the same amount and will allow you to easily see the balance of trades that have been made on margin by analyzing the newly created GL account. Additionally, the notes and reference fields can be used when booking a margin trade to further identify it.

To create the Margin Liability GL account, navigate to Accounts within the Financial Module and follow the steps to create a new account:

The example journal entry below illustrates a trade of ETH for BTC made on margin. A margin trade would be booked in the transactions tab of the crypto module using the same process that a non-margin trade would follow.

Dr: BTC Asset


    Cr: ETH Asset


    Cr: Gain

The simultaneous deposit transaction to capture the margin liability is as follows:

The resulting journal entry example:

Dr: ETH Asset


    Cr: Margin Liability

*It is important to make sure that the transaction above uses the same price as the original trade.

When it is time to settle the margin account, a withdrawal transaction will be booked, reducing the asset that was deposited in conjunction with the margin liability, and reducing the margin liability account.

The resulting journal entry example:

Dr: Margin Liability Account


    Cr: ETH Asset

Option #2 – Tracking margin trades periodically

This method assumes that margin trading activity has been taking place and that the activity will be reconciled with the margin account periodically and not in real time as Option #1 contemplates. Similar entries to the example above will be booked, but rather than on a transaction by transaction basis, they will be booked periodically in a lump sum to ensure that any balances that went negative were satisfied.

Input Fields for Margin Crypto Trades

Each crypto transaction type (e.g. deposit) will have varying input fields based on the nature of the transaction. You can see more about the input fields for each of the transactions from the examples above in their associated articles:

Contact support for more details and guidance regarding crypto derivative (or other more advanced) transactions.