Unrealized gains

Charles Day cedayiv at gmail.com
Mon Jun 30 00:29:14 EDT 2008


On Sun, Jun 29, 2008 at 3:46 PM, Charles Day <cedayiv at gmail.com> wrote:

> I have attached a couple of examples of how messy it can become in the
> current version of GnuCash when you sell currency or investments for a gain
> and keep the books in balance.
>
> The first file, 2eur, is an example of currency gains. The "home" currency
> is USD and there is a bank account named "USD Bank" that starts with $1400.
> $700 is converted to Euros and transferred to "EUR Bank". The remaining $700
> is also converted to Euros and transferred to "EUR Cash". What happens if
> the exchange rate changes slightly, and we spend some of that Euro cash to
> buy a nice dinner? It turns out that to keep the books in balance, I had to
> enter quite a complicated transaction involving a complete revaluation of
> all Euros held, regardless of which account they are held in.  That
> transaction was tough to key in, too, as I had to fight with the register,
> and on some of the splits the exchange rate had to be zero!  (I wonder if
> this might cause a divide-by-zero crash at some point.) If any of these
> splits are removed, the trial balance will fail. Imagine the nightmare if I
> had Euros in asset accounts instead of just two.
>

... that should have been "ten accounts instead of just two."


> Just in case I did this the really hard way, if anyone has a suggestion on
> how to enter this transaction more easily and without changing the currency
> that each account is denominated in, please let me know. Of course, there
> would have been no need to calculate any gains if Expense:Dining was
> denominated in EUR instead of USD, but that assumes that you are happy to
> manage separate expense accounts for each currency you use.
>
> The second file, 2brokers, is an example of accounting for investment
> gains. Stock in XYZ corporation has been purchased in two separate broker
> accounts. At one broker, a few of the shares are then sold for a profit. To
> keep the books in balance, the sell transaction needed 8 splits. Again, take
> a look at the trial balance. Remove any of those splits and the books become
> unbalanced.
>
> In both these examples, if trading accounts had been used there would be no
> need to calculate unrealized gains, as that would happen automatically.
> Putting in the realized gain would just be a transfer from the unrealized
> gains account to the realized gains account (essentially just reclassifying
> some of the unrealized gain as realized, which also avoids doing your own
> subtraction).
>
> Cheers,
> Charles
>


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