Trial balance failed!

[Charles Day]

On Jan 25, 2008 12:36 AM, Miano Murage <mianomurage at zinkdigital.com> wrote:
>
> Hi,
> I found some information on the problem in the address below.
>
> http://www.mscs.dal.ca/%7Eselinger/accounting/gnucash.html
>
> Any comment on the same?

This way of doing currency accounting was brought up a few months ago
in this mailing list before I subscribed, so I never got a chance to
comment on it.  So at the risk of covering old ground, here goes.

My reading of the author's suggested method is that, while it is
perfectly valid, it essentially asks for separate books to be kept for
each currency. The "Currency" accounts referred to in the writeup seem
to function like Equity accounts in which assets are added or removed
from each currency's set of books.

In my opinion, a buying or selling a currency should be handled the
same as buying or selling a stock, bond, bar of gold, or any other
commodity. If special exchange accounts aren't needed to properly
account for stock trades, then they aren't needed to properly account
for currency trades either. (Perhaps the author would reply that they
*are* needed for stocks, I don't know.)

In any case, it seems to me that in order to avoid breaking the trial
balance, GnuCash needs to force users to properly account for capital
gain/loss entries whenever a trade is done between commodities, be it
stocks, currencies, whatever.

.02

-Charles

>
> Miano.
>
> On Tue, 2008-01-22 at 08:39 -0500, Derek Atkins wrote:
> > Hi,
> >
> > Miano Murage <mianomurage at zinkdigital.com> writes:
> >
> > > Hi,
> > > Actually, the trial balance is important to check whether the double
> > > entry is done correctly. The accuracy of all other reports including the
> > > Balance sheet will depend on the accuracy of the double entry system and
> > > hence the trial balance.
> >
> > I believe you, but I've always just run the full balance sheet.
> > You can see from there if the double entry is broken.
> >
> > > Well, the rates in the price editor in deed affect the trial balance. In
> > > the reports window under Options - Commodities - Price source, if you
> > > choose the option 'Nearest in time' the exchange rate to be used in the
> > > report is form the Price Editor.
> >
> > ok.
> >
> > > What i don't really understand is how gnucash computes "Unrealised
> > > gains".
> >
> > I dont know.  The trial-balance was donated.  You could look in
> > 'trial-balance.scm' and find out?
> >
> > > For instance:
> > > My default currency is KES (Kenyan Shilling). I also maintain a US
> > > Dollar Bank Account (USD). The exchange rate is set at KES 66 per USD in
> > > the Price Editor. Thus far, the trial balance is Ok.
> > > When I credit the Dollar Account with the bank charges of $10 , (the
> > > BANK CHARGES account is a KES expense account) at a rate of 65 the trial
> > > balance goes off by an amount of KES 640(Dr. side exceeds the CR side).
> > > There is however an amount indicated as Unrealized gains of KES 650
> > > which obviously will not offset the imbalance!
> >
> > Correct, because you need to manually account for the gain/loss of
> > the transaction.  If your expense account was in USD then this wouldn't
> > be a problem.  But because your expense account is in KES then you
> > need to manually account for the gain/loss of USD<->KES between
> > when the money was put into the USD account and when it was taken out.
> > For example, let's assume you put in $100 at 66 KES/$, so your $100
> > account is worth 6600KES.  Now you remove $10 at 65KES.  That means you
> > removed 650KES from your 6600KES, but you removed $10.  That means you
> > have 10KES "extra" in your account, which you need to account for!
> >
> > > Might it be possible that gnucash can track the gains/losses in changes
> > > in currency exchange rate automatically like other accounting softwares?
> > > If yes, how do you activate this?
> >
> > It should be turned on automatically IFF you have F::Q support, unless
> > you turned it off for your commodity or it can't find currency quotes
> > for you.
> >
> > >> >> Please remember to CC this list on all your replies.
> > >> >> You can do this by using Reply-To-List or Reply-All.
> >
> > -derek
> >
>
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