Profit and Loss with foreign currency.

[David Bergum]

This isn't exactly a GnuCash issue, but relates to using GnuCash with multiple currencies in getting a trial balance to balance.  So I'm sharing my experiences in preparing a tax return for our S Corp with information from GnuCash, and getting a balance sheet to balance.

We have some income in NZD and an NZ bank account.  During the time we work in NZ we make an international transfer of funds to a US account.  We have company expenses in NZ, some of which are payed by credit card and converted to USD in the process, and some are paid in cash from distributions in NZD from the NZ account.  Those get converted in GnuCash to the expense accounts using the current exchange rate.

When balancing cash/assets at the beginning of the year with cash/assets at the end of the year, adding income, subtracting expense, using the Balance report and profit and loss report, we invariably end up out of balance.  After much hair pulling, I figured out that the NZ income in NZD is converted to USD for the profit and loss report using one of several methods to obtain an exchange rate, average, weighted average, closest in time, latest.  When I calculate my actual NZ income by adding up the actual international transfers, I get a different number for an average exchange rate.  This number doesn't exactly give me a balance either; it is closer, but there are funds left in the NZ account, and there are NZD expenses paid in cash that effect the balance.

So what I have decided to do to make things work, is to just *fudge* the NZ income amount in USD to make things balance.  The effective exchange rate is very close to what my actual average rate was in the transfers I made, but is off a little due to the amount of money left behind in NZ, and the direct cash expenses in NZD and how they are converted in the expense accounts.

I don't know what the *proper* way is to do this, but I can very much sympathize with multinational companies that have multiple currencies.  It just make the head spin.

Being a total amateur, do you have any similar experiences or know the accepted practice in these regards?

Thanks and regards,
Dave