Implementing COGS with multicurrency

[Vladimir Avramenko]

Thank you for response, Alun.

As you pointed, the alternative is to track account Assets: Inventory: 
Tickets in EUR. In this case your scheme is transformed to the following 
one:

Receive tickets for resale (1EUR=1.3 USD):
Liabilities: A/P: EURO 100
Assets: Inventory: Tickets: EURO 100

Sell ticket (1EUR=1.3 USD) :
Income: Sales: $130
Income: Fee: $10
Assets: Account: $140
Assets: Inventory: Tickets: EURO 100
Trading: EUR: EURO 100
Trading: USD: $130
Expense: COGS: $130

Pay vendor for tickets (1EUR=1.4 USD):
Assets: Account: ($140)
Trading: USD: $140
Trading: EUR: EURO 100
Liabilities: A/P: EURO 100
Trading: USD: $10
Expenses: Currency Loss: $10

The net result is equal for both schemes:
Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: 
($130)+Expenses: Currency Loss: ($10)

Suppose that exchange rate when i received ticket from vendor was 
1EUR=1.2 USD. In your scheme:
Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: 
($120)+Expenses: Currency Loss: ($20)

In the second scheme the statement does not change:
Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: 
($130)+Expenses: Currency Loss: ($10)

 From my point of view the second scheme is closer to "real cash flow": 
conversion of currencies takes place at two moments: when selling to 
customer and when paying to vendor (and not when borrowing ticket from 
vendor).
What do you think?

______________________
Thank you in advance,
Vladimir

On 01/31/2014 05:42 PM, Alun Champion wrote:
> You should check with a tax professional when you should count the
> asset in your home currency but here's how it could work. If you
> receive and sale at the same time then the first 2 transactions could
> collapse to one and you wouldn't need the Tickets account.
>
> Receive tickets for resale (immediately book in home currency):
> Liabilities: A/P: (EURO 100)
> Assets: Inventory: Tickets: $130
> Trading: EUR: EURO 100
> Trading: USD: ($130)
>
> Sell ticket - direct payment (alternatively use a A/R account to
> separate customer sale and payment)
> Assets: Account: $140
> Income: Sales: ($130)
> Income: Fee: ($10)
> Assets: Inventory: Tickets: ($130)
> Expense: COGS: $130
>
> Pay vendor for tickets:
> Liabilities: A/P: EURO 100
> Assets: Account: ($140)
> Trading: EUR: (EURO 100)
> Trading: USD: $140
> Trading: USD: ($10)
> Expenses: Currency Loss: $10
>
>
>
> On 31 January 2014 01:08, Vladimir Avramenko
> <vladimir.avramenko at gridnine.com> wrote:
>> There is perfect explanation for the process with single currency given in
>> http://permalink.gmane.org/gmane.comp.gnome.apps.gnucash.user/44097
>>
>> Could someone please give me the similar scheme for the case of two
>> currencies. Namely:
>> 1. Suppose my Company resells air tickets in USD.
>> 2. Company takes a ticket from Vendor (Vendor works with EUR, and the ticket
>> costs 100 EUR)
>> 3. Company resells ticket to Customer in USD with rate EUR = 1.3 USD plus
>> Company takes an additional Fee 10 USD from Customer
>> 4. Company pays 100 EUR to Vendor with rate EUR=1.4 USD
>>
>> It is preferable to use Trading account because, according to article
>> http://www.mathstat.dal.ca/~selinger/accounting/tutorial.html, it is the
>> most correct way to deal with multicurrency.
>> ______________________
>> Thank you in advance,
>> Vladimir
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