Balancing the balance sheet (multi-currency issues?)

David Carlson david.carlson.417 at gmail.com
Mon Dec 23 19:44:46 EST 2013


On 12/23/2013 3:20 PM, Egbert van der Wal wrote:
> Hi,
>
> I partially do and partially don't see the issue. In the meantime,
> I've been reading Peter Selingers story about multi-currency
> accounting and how this can be done in gnucash. I also enabled trading
> accounts and this allows me to fix the issue, though I still need to
> set the currency selection to 'weighted average', all the others still
> give an unbalanced balance sheet.
>
> However, no such scenario as you described took place. The accounting
> is in EUR. What happened in other currencies is this:
>
> - An order has been placed in the USA in january which was billed in
> dollars and paid immediately by EU credit card. The amount subtracted
> from the credit card in EUR was entered as the matching amount for the
> transaction
>
> - An order has been placed in Australia in february which was billed
> in AUD and paid immediately by paypal. The paypal account subtracted
> the money from a EU bank account in EUR.
>
> - Another order has been placed in the USA in june, which was billed
> in dollars and paid immediately by EU credit card. Same story as above.
>
>
> There was never any trading euro to dollar and back. At each occasion,
> a paymant was made in a foreign currency and the accompanying exchange
> rate was entered directly for that transaction.
>
> Theoretically, this shouldn't bring in any disbalance, in my opinion,
> since no money was lost. What I suspect is happening is that due to
> the USD payments were made in a subaccount under 'Expenses', named
> 'Hardware USD' and with currency set to USD, and the AUD payments were
> made in a subaccount under 'Expenses' named 'Hardware AUD' and with
> currency set to AUD. Can it be so that even though for each
> transaction in USD the exact corresponding amount in EUR is entered,
> GnuCash tries to get an 'average' exchange rate for the total amount
> of USD spent, which doesn't match reality and therefore results in a
> disbalance?
>
> Thanks for the help.
>
> Bye,
>
> Egbert
>
>
> On 23/12/13 21:27, Derek Atkins wrote:
>> Egbert van der Wal <ewal at pointpro.nl> writes:
>>
>>> On 20/12/13 19:50, Derek Atkins wrote:
>>>> Hi,
>>>>
>>>> Egbert van der Wal <ewal at pointpro.nl> writes:
>>>>
>>>>> How can I generate a balance sheet that has a total under 'Assets'
>>>>> that exactly matches the total at the bottom of 'Liabilities &
>>>>> Equity'?
>>>> You need to account for the gains/losses of your currency exchanges.
>>>>
>>> Be that as it may, in all my accounting classes I've always been
>>> taught that a balance should be... well... balanced! And it's not,
>>> currently. Is there any way to reroute these gains / losses of
>>> currency exchanges to an expenses account, for example, to make the
>>> balance balance?
>> It's not in balance because you made money appear or disappear without
>> accounting for it.  For example, assume you buy €100 for $125.  Then
>> some time later you trade them back for $120.  Now you have €0 and $120,
>> but $5 magically disappeared.  I.e., your accounts are now out of
>> balance unless you account for that $5 you lost in trading.  GnuCash has
>> no way to track this due to the way multi-currency transactions are
>> implemented, so you have to add the gain/loss manually.  Either that or
>> you need to turn on Trading Accounts.
>>
>>> Thanks,
>>>
>>> Egbert van der Wal
>>> Please remember to CC this list on all your replies.
>>> You can do this by using Reply-To-List or Reply-All.
>> -derek
>>
>
>
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You are correct.

For those three examples that you listed, if you had entered all of the
values in your default currency, Euros, you would not see any problem
with balances.  Since you have some expense accounts in foreign
currencies  those expenses change in value when the exchange rate
changes.  Your purchase transactions exchanged some Euros  for expenses
valued in foreign currencies.  Now you need to re-value those expenses
back to Euros before your books will balance.  Doing that on the same
day that they were incurred should make your books balance every day.

The transactions that would accomplish that would be to trade USD
expenses for EUR expenses or AUD expenses for EUR expenses, in a similar
manner to trading foreign currency assets with domestic currency assets.

Wouldn't the Trading Accounts option allow you to 'convert' those
expenses to Euros on the dates that they occurred?  That should then
allow both balance and income reports to balance correctly on arbitrary
dates, as opposed to using trickery like weighted average or only doing
reports for dates where the exchange rates are included in your data.

This may not address all of your tax reporting concerns if you are a
business, but it should work for general use.

David C




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