Profit calculations

Wouter van Marle wouter at squirrel-systems.com
Tue Nov 30 23:42:08 EST 2010


Hi group,

Today I was trying to calculate the profit my company has made of the
last period (starting 1 April - the financial year), and three methods
gave me three totally different results, while I kept settings the same!

Accounts: selected "default".
Price source: "nearest in time". 

I trade a lot overseas: many purchases are in Euro, while sales are in
USD or HKD (those two are linked so barely any rate variation). The
EUR/USD rate of course behaves like a yo-yo. Choosing "average cost" for
price source gives very very different results.

Now the results:

Method 1: Income Statement report. Net income $131k.

Method 2: I/E Chart report; added "table" to get numerical results as
well. Net income $266k.

Method 3: I've learned before that the profit of a company is calculated
as the change in the value of it's assets. So that's what I did now. I
took a balance sheet of 1/4/10, calculated assets-liabilities, then took
balance sheet of 1/12/10, did the same calculation, and the increase in
this number is my profit: $443k.

What am I (or is GnuCash) doing wrong here? And which method gives my
actual profit? I can understand small differences thanks to exchange
rates (though even that with same settings for price source shouldn't
need to happen), but this is simply a huge difference, and just doesn't
make sense anymore.

Previous years I haven't seen this kind of problems - definitely not
this pronounced. It's really strange.

Wouter.



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