Multi-Currency Setup

dezutterm mathieu at dezutter.org
Sun Jun 5 14:35:09 EDT 2011


Tony wrote:
> 
> I'd largely operate in 2 currencies simultaneously.  Is there a consensus
> view on the right way to setup up accounts for this?  
> 
> I'm tempted to just pick a home currency (USD) and have child accounts for
> all my income/expense accounts for the second currency (GBP).
> 
> E.g. I'd have such pairs as:
> 
> Assets:Current Assets:Cash
> Assets:Current Assets:Cash:GBP
> 
> or
> 
> Expenses:Housing:Rent
> Expenses:Housing:Rent:GBP
> 
> Is this a smart setup, or is there some other standard?
> 

Hi Tony,

I am not an accountant, but here's my view on it:

Yes for assets/liabilities, No for income/expense

Image in your case that receive 100 pound and you write that in your
Income:Gifts:GBP account.
At that time the rate is 1.6, so you have an income (for gifts) of 160
dollar (your home currency).
Some time later the rate is 1.7, so suddenly you have made an extra 10
dollar from a gift (your gift account has increased!). This doesn't make
sense. You should make the difference between gain from the gift and the
(un)realized gain from the fluctuating exchange rates. Therefore
income&expense should always be expressed in your home currency.

How to solve it, an example:

1) You receive a check of 100 pound (rate = 1.6)

Check GBP: + 100
Income USD: +160

2) A month later you cash the check on a USD current account (rate = 1.7)

Check GBP: -100
Current Account USD: +170

This way your historic income is invariable in time. It's always calculated
using the the exchange rate of the time of transaction, not of the current
time. The trading accounts will contain the gains/losses on exchange. It
makes sense to separate it because you decided not to cash in the check
directly, so you're actually investing in some foreign currency.

Kind regards,
Mathieu

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