gnucash-user Digest, Vol 47, Issue 14

[Cory Helfrich]

>> expenses are paid in cash in two different currencies. What is the
>> best way to represent this is gnucash? I presently have accounts
>> Expense:Food:Groceries (with currency CAD),
>> Expense:Food:Groceries:Curr2 and Expense:Food:Groceries:Curr3. This
>> makes data entry (and import from Quicken) simple (no exchange rate
>> for every transaction), but the totals from the Curr2 and Curr3
>> accounts are rolled up at the present exchange rate, which is not
>> really correct. Note that this is the way Quicken handles these
>> expenses. Also, this method greatly increases the number of accounts
>> within gnucash. The expenses should really be rolled up at the
>> exchange rate that I paid for the Curr2 and Curr3 cash, correct? Can
>> anyone give me some advice as the the best way to set up my chart of
>> accounts?
>>
>
> Ok, full disclosure, I'm new to gnucash, too, so if I say something
> wrong I expect the legion of veterans to come in quickly to clean up
> my mess.
>
> Regarding your first question of accounts "roll[ing] up at the
> present exchange rate", do you mean you'd rather have each
> transaction entered at its x-rate at the time of entry?  I'm not sure
> I understand your question.
>
> As for your account hierarchy, my understanding from looking at the
> gnucash data file is one account -> one commodity (where commodity
> here = currency).  Thus, the way you're setting it up sounds right...
> you want one account for your grocery expense in CAD and one for it
> in USD.  As for organizing that, I'd say you have many different
> methods but two stick out in my mind depending on what your goal is:
>
> Method 1:
>
> Expenses:Groceries:CAD
> Expenses:Electricity:CAD
> Expenses:Groceries:USD
> Expenses:Electricity:USD
>
> Method 2:
>
> Expenses:CAD:Groceries
> Expenses:CAD:Electricity
> Expenses:USD:Groceries
> Expenses:USD:Electricity
>
> Method 1 will quickly and easily show you your total grocery expense
> at the level of Expenses:Groceries.  Method 2 will show your total
> CAD and USD expenses at the top level of the Expenses hierarchy.
> Just depends on what you want...
>
> HTH
>
> Jeff
>
>
Thanks for the quick reply, Jeff. Method 1 is the way I have my  
accounts presently set up and I think this is correct. However, I am  
wondering if it is more accurate to have an Expense:Groceries account  
and have each transaction converted to the correct currency at the  
exchange rate at the time of the transaction. Consider the following:

On 1/1/2007, I change CAD to USD to buy groceries. The exchange rate  
is 1.25. The two transactions would look like this:
Asset:Cash:CAD -125.00
Asset:Cash:USD +100.00 (these are balanced due to the exchange rate)

Asset:Cash:USD -100.00
Expense:Groceries:+100.00

Then on 2/1/2007, I repeat the process, but the exchange rate is  
1.20. The two transactions would look like this:
Asset:Cash:CAD -120.00
Asset:Cash:USD +100.00 (these are balanced due to the exchange rate)

Asset:Cash:USD -100.00
Expense:Groceries:+100.00

Then, later on 2/1/2007, I run a YTD report. The total for  
Expense:Groceries:USD is 200.00. This gets converted to my base  
currency (CAD) at the present exchange rate (1.20) as 240.00.  
However, I actually paid CAD245.00 for these groceries.

One method I was considering to get correct totals is to add a  
transaction to "zero out" the Expense:*:USD accounts each time I  
"buy" USD. For the above example, I would add the following  
transaction on 1/31/2007:
Expense:Groceries:USD -100.00
Expense:Groceries:CAD +125.00 (these are balanced with the exchange  
rate of 1.25)

This method could get tedious, as the number of currency correction  
transactions per year = # of expense accounts (e.g.  
Expense:Groceries) x # of currencies x # of times per year the  
currency is converted.

What is the correct method to handle multi-currency expenses in gnu- 
cash? Is there a way to get gnu-cash to report the account totals  
using a exchange rate that depends on the time of purchase?

Thanks again, Jeff, for your help and thanks to all for this software.

Best regards,

Cory Helfrich
coryhelfrich at yahoo.ca