Multi-currency advice

[Cory Helfrich]

Sorry, forgot to change the subject!
Cory Helfrich
coryhelfrich at yahoo.ca



Begin forwarded message:

> From: Cory Helfrich <coryhelfrich at yahoo.ca>
> Date: February 11, 2007 4:02:33 AM GMT+03:00
> To: jeff at soldmy.net
> Cc: Cory Helfrich <coryhelfrich at yahoo.ca>, gnucash-user at gnucash.org
> Subject: Re: gnucash-user Digest, Vol 47, Issue 14
>
>>> 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
>
>
>