Currencies / the accounting equation.
Sun, 1 Oct 2000 19:21:13 -0500
On Sun, Oct 01, 2000 at 02:37:40PM -0700, Dave Peticolas wrote:
> To me, the above transaction says "I took $100 out of my bank account
> and put it in my cash account. The $100 dollars coming out of my bank
> account is worth 105 Euros and the $100 going into the cash account is
> worth 65 Pounds."
OK. I was just trying to come up with a narrative for how a user
might have arrived at a transaction like that.
> > Acct DR CR
> > cash(USD) USD 100 (USD 100)
> > cash(USD) USD 47 (EUR 50)
> > cash(USD) USD 35 (GBP 25)
> > cash(USD) USD 18 (ITL 20,000)
> I don't understand this transaction. According to this transaction,
> you still have the same number of dollars as you started with in
> the cash account.
Right. That's why I said "tourist-like". It's a contrived example,
but it's conceivable to me that someone might want to describe a
currency exchange that way: take out cash, put in cash in a different
currency, but note it in your books in USD because it's too much of a
pain to make a new cash account for this purpose. I'm not saying
that's a good thing to do; I was just trying to come up with a concise
example. The multiple-cash-account example is better, you're right,
and using one account to accumulate in multiple currencies is not
proper accounting. I wouldn't be upset if the possibility of doing it
> I think one of the things that bothers me about the current balancing
> rules is that they treat the currency and security as interchangeable,
> when they really mean different things.
They are interchangeable for the purposes of balancing, IMO. A split
with both a damount and a value is a concrete statement of a financial
identity. 100 USD is equivalent to 107 EUR in that transaction (for
example), and even stronger: 100 USD was exchanged for 107 EUR in that
> What if we required transactions to have a common valuation currency?
> What if the currency were associated with transactions instead of
> splits, and we always balanced with the value?
That sounds more-or-less reasonable to me. I need to think a bit about
the user interface ramifications a bit... how would you figure
out which currency to use in a transaction?