Trading accounts - when do they make sense?

[Mike Alexander]

On Aug 29, 2012, at 6:39 PM, Mark wrote:

> I am using trading accounts for my GnuCash file, although I am not sure if that really makes sense for this scenario. What I noticed was that after entering a bunch of groceries transactions, the balance on the top-most trading account was negative, although I had only entered transactions from a EUR checking account to the USD Expenses:Groceries account. No other transactions were booked in any of the trading accounts. And all of the transactions in all the trading accounts were in one direction only (EUR converted to USD).
> 
> So now I am wondering
> 
> * Does it make sense that the trading account balance is not 0,
>   considering that I am not really buying and selling a currency so
>   far (all transactions were EUR->USD only -so just buying, not
>   selling yet)?

Yes, if you are doing cross currency transactions, i.e., if you have transactions where not all splits are in the same currency.  In this case you are effectively moving money from one currency to another.

> * Does the trading account affect any of the reports (net worth bottom
>   line, etc)? Or is the trading account balance not really considered
>   anywhere?

I believe that the balance sheet reports are affected by trading accounts, but most others are not, but I can't remember for sure.

> * Does it make sense to use trading accounts in my case?

Probably, but that's really up to you.

> * Would I be better off to keep my groceries separated into
>   Expenses:Groceries:US and Expenses:Groceries:DE as well in order to
>   avoid multi-currency transactions; and use multi currency
>   transactions with trading accounts only for those cases, for which
>   it really does make sense (although I am not quite sure which
>   transactions that would be)?

I keep a different expense sub-account for each currency.  If I (for example) pay for a restaurant in England with an American credit card, then this is a cross currency transaction from the USD credit card to a GBP expense account and involves trading accounts.  However if I pay for this meal with a British credit card then it involves only one currency.  This seems to work well for me, but it's no doubt not the only (or even necessarily the best) way to do it.

            Mike