Multiple Currencies (was: The Accounting Equation does not seem to hold)

Sébastien Monnet sebastien.monnet at gmail.com
Sun Nov 12 08:38:19 EST 2006


Sorry for the previous message without subject (mailer bug).

Seb.

--

Hi,

I've also got expenses in different currencies. I've got multiple  
cash accounts ("cash €", "cash $"...etc.). If I change back cash,  
I've got a potential gain/loss as Derek wrote. In this case the gain  
(or the loss) comes from
an income (or expense) account (using split transactions). And I keep  
this way the  zero-sum Accounting Equation *and* track my gains/ 
losses while changing currency.

Sébastien.
Le 12 nov. 06 à 14:11, Leo Breebaart a écrit :

Le 12 nov. 06 à 14:11, Leo Breebaart a écrit :

> Derek Atkins <warlord at MIT.EDU> writes:
>
>> Quoting Leo Breebaart <leo at lspace.org>:
>>
>>> I thought I had learned from the GnuCash docs that the
>>> Accounting Equation (Assets - Liabilities = Equity + (Income
>>> - Expenses)) is invariant and should by definition hold,
>>> [...]
>>
>> Yes, the equation is correct...
>
> Good, at least I'm not completely off my rocker, then.
>
>
>> This is a "capital gain/loss" problem. Whenever you exchange
>> commodities you need to handle the gain/loss back to your main
>> currency. E.g. if I buy 100EUR for $125 and then later sell
>> those 100EUR for $130, I've got a "gain" of $5 that I have to
>> account for.. I bet you're not accounting for your gain (or
>> loss, if it's in the other direction).
>
> I think I see what you mean. My use case is not so much buying
> and selling foreign currencies in bulk, but rather that I am
> trying to keep track of my personal cash flow, some of which
> takes place during trips to other countries, and therefore in
> other currencies.
>
> So I figured that if I created separate cash accounts for the
> different currencies, I could still keep tracking say
> Expenses:Food:Dinner, whether or not I paid for it in EUR (at
> home) or in USD (during a trip).
>
> But of course, as you say, different batches of dollars will
> still have been bought at different exchange rates when going in
> to the cash account, and therefore it is impossible to really
> come up with a perfect matching exchange rate for the dollars
> that go *out* of it again as individual expenses. Right?
>
> Okay, so now I think I understand what's happening, but I am
> still at a loss as to what I should *do* about it. Do I just have
> to accept that if I work with multiple currencies I will no
> longer get a zero-sum Accounting Equation? Should I start adding
> manual Equity transactions to compensate (that seems ugly!)? Is
> it perhaps an option to create separate GnuCash files for keeping
> track of the separate currencies?
>
> In short: do other people out there have this same problem at all,
> and if so, how do they handle it?
>
> --
> Leo Breebaart  <leo at lspace.org>
> -- 
> Leo Breebaart  <leo at lspace.org>
>
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--
Sébastien Monnet
http://www.irisa.fr/paris/pages-perso/Sebastien-Monnet/
Jabber : smonnet at jabber.grid5000.fr
IRISA / University of Rennes I
35042 Rennes cedex, France







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