Problem creating a "Currency" account.

[Charles Day]

On Fri, Jun 27, 2008 at 10:51 AM, Derek Atkins <warlord at mit.edu> wrote:

> Quoting Charles Day <cedayiv at gmail.com>:
>
>  If GnuCash lets you do this then this is a bug and should be fixed.
>>> You shouldn't be able to have Income/Expense accounts in non-currency
>>> commodities.
>>>
>>>
>> An income account denominated in a non-currency makes sense if the user is
>> trying to automatically keep track of capital gains for non-currencies
>> using
>> Peter Selinger's tutorial (implement trading accounts). So it seems like
>> an
>> exception would need to be made in order to allow that.
>>
>
> no, it still doesn't make sense.  You're not making income of the
> stock.  It's just a change in the equity holding of the stock.  The
> income is all about the change in value made when you trade the stock
> in for a currency (or dividends, but that's a different beast).
>

The capital gains are income, and trading accounts express that income in
terms of the two commodities traded. Doesn't matter whether one is a
non-currency. Take another look at the formulas in section 4.1:
http://www.mathstat.dal.ca/~selinger/accounting/tutorial.html#4.1.

I really see no theoretical difference, at the debit and credit level,
between currencies and non-currencies. Both are black boxes with an exchange
rate.

you do not need an "Income" account -- it can be an Equity account
> (or indeed an ASSET account).
>

The parent of the trading accounts represents capital gains, so it has to be
an income account and so do the children. I don't see how balance sheet
account types would work.

I still maintain that Peter is wrong in that he conflates Realized
> with Unrealized cap gains
>

Can you explain how this differs from current practice? To keep the books in
balance, all gains (both realized and unrealized) have to be accounted for
upon every sale of a non-home currency or non-currency. Even without trading
accounts. The GnuCash Concepts guide doesn't address this, because the
examples of selling stock are simplified by selling all shares, which
eliminates unrealized gains from the picture. In any case, whatever the
realized gain is, using Peter's method you'd just have to transfer that
amount from the parent of the trading accounts into your realized gains
account. Just add two splits to the sale transaction.

I need to look at Mike Alexander's patch.  I wonder if we need a
> "trading" account type that is neither equity nor income as a special
> account type to handle this.
>
>  Heck, in theory I don't see why any account couldn't be denominated in a
>> non-currency. It could even be the "home" currency, though I don't know
>> why
>> someone would have a need for that.
>>
>> But GnuCash isn't designed that way. Non-currencies have been fenced off
>> for
>> some reason (Does anyone know why?). So there are probably hidden side
>> effects in using Fred's workaround.
>>
>> So maybe, for the moment, using trading accounts for non-currencies is not
>> supported by GnuCash. So unless you want to try Fred's workaround and see
>> what happens, it looks like you're stuck with using SSAP 20 to keep the
>> books in balance for non-currencies. :(
>>
>> If we have a discussion about how to implement trading accounts on
>> gnucash-devel, I'll be happy to participate. I meant to start one, but
>> have
>> just been swamped the last few days.
>>
>
> We've had several discussions over the past few years.
>

They keep coming back because GnuCash still allows the books to get out of
balance. At least that flaw ought to be cured. Even if no specific support
was implemented for trading accounts, the imbalance calculating routines
could at least be adjusted to make imbalance splits for unrealized gains.
That would at least get us to SSAP 20 on both imported transactions and
manually-entered ones. But because of independence of viewpoint and the
avoiding of order-of-entry problems, trading accounts seem like a better
solution.

-Charles

Charles
>>
>> -derek
>>
> Cheers,
>
>  Please remember to CC this list on all your replies.
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>>>
>>
> -derek
>
> --
>      Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>      Member, MIT Student Information Processing Board  (SIPB)
>      URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
>      warlord at MIT.EDU                        PGP key available
>
>