"Unrealized Losses" in Trial Balance Report
Christopher Lam
christopher.lck at gmail.com
Thu Mar 22 10:16:27 EDT 2018
Hi Richard
If I understand 'unrealised gains', this is a known issue.
I think any double-entry accounting system will have this issue when
currencies or stocks are converted without accounting for capital gains.
With stocks we expect to receive capital gains and are usually taxed on
these gains; and these gains must be documented in Gnucash. With currency
conversions (to and from), we don't usually expect to account for capital
gains.
The issue has been documented by
http://www.mscs.dal.ca/~selinger/accounting/tutorial.html and
http://www.mscs.dal.ca/~selinger/accounting/gnucash.html
I think if the gains are documented correctly the TB should balance. The
Balance sheet has been fixed when Trading Accounts are enabled, but the
Trial Balance was missed out.
^ All above IANAA, just have some inkling that numbers should balance,
except when the exchange rates / share prices are not fixed.
Simplest answer for the accountant is to *not* document currency
gains/losses using Gnucash; if I have accounts in GBP and USD I'd keep
separate books.... and whenever I do an international transfer I'd make the
money disappear from Asset:GBPBank -> Equity:Foreign, and Equity:Foreign ->
Asset:USDBank in the two books separately. I'll present both chart of
transactions separately and let the accountant handle the headache.
HTH, C
On Thu, 22 Mar 2018, 17:44 Richard <richardcd73 at gmail.com> wrote:
> Thanks for your thoughts, Adrien.
>
> Yes, I do have losses from changes in exchange rates between when I booked
> a currency and the date of the report. However, these changes were tiny
> compared to the "Unrealized Losses" figure that appeared in the Trial
> Balance report. So, while I agree that this report shouldn't show virtual
> accounts, the bigger question in my mind is, "Where did this number come
> from?" That's still a mystery to me, but the use of multiple currencies is
> definitely a trigger. As soon as I remove all transactions in a foreign
> currency, this line disappears from the report.
>
> About this rounding bug you described: are you sure this affects only the
> Trial Balance report? I'm worried that this could cause a lot of other
> problems.
>
> It sounds like I have to give up on putting foreign currency transactions
> in my GnuCash books until these problems are fixed. I see your point that
> Trial Balances should not be necessary, but I don't think I'm likely to get
> my accountant to change her ways because GnuCash won't generate the reports
> she wants, and I'm not quite ready to go looking for a new accountant!
>
> Thanks,
> Richard
>
> ----------------------------
>
> On 22/3/18, 2:22 PM, "gnucash-user on behalf of Adrien Monteleone"
> <gnucash-user-bounces+richardcd73=gmail.com at gnucash.org on behalf of
> adrien.monteleone at gmail.com> wrote:
>
> You might see unrealized losses with multiple currencies to account
> for the change in value between the time you booked a currency and the date
> of the report.
>
> So if you converted some SGD to USD at some particular exchange rate,
> and that rate has since changed (very likely) then you will either have a
> gain or loss (depending on the direction of the change) that is yet
> unrealized because you haven’t converted the USD back to SGD. If you did
> convert them back, the loss or gain would be realized in the conversion
> transaction.
>
> But I’m not sure why the report shows the unrealized figures at all.
> It really doesn’t belong in there unless I don’t understand ’trial balance’
> properly. It should be showing you the balance of ACTUAL accounts, not
> virtual ones.
>
> What’s worse, even without that figure, I also discovered that you can
> get an imbalanced result here even if the value hasn’t changed. There is a
> rounding bug that kicks in because the report takes the newer value based
> on a rounded total of the foreign currency. But the asset account register
> for that currency only rounds the display, not the actual figures. The
> cumulative effect can be a gain/loss of several currency units over a 2
> year period.(noted in that thread you linked) So if you have multiple
> currencies, this report is most likely going to be wrong.
>
> Really, the report is not necessary any longer using computers instead
> of paper books. The purpose of the trial balance is to check your books
> before you close them. But you don’t need to close your books with Gnucash.
> If you are closing, you want to make sure everything is correct because the
> process of closing wipes out some accounts back to zero, effectively
> ‘erasing’ their history. (or rather, fixing their history as a single
> end-of-period figure, rather than individual transactions) In the days of
> paper, this was necessary as part of the process of creating the basic
> financial statements. But with Gnucash, you don’t need to close the books
> in order to generate those financial statements. (Income Statement, Balance
> Sheet, etc.) You can generate those reports at any time.
>
> Regards,
> Adrien
>
> > On Mar 22, 2018, at 1:02 AM, Richard <richardcd73 at gmail.com> wrote:
> >
> > Hi there,
> >
> >
> >
> > I’ve been using GnuCash for about a year to run a small business in
> Singapore. I’m thrilled that it has worked so well, since I have no
> accounting experience, but I’m trying to create a Trial Balance report for
> my accountant, and I can’t get it to work right. At the bottom of the
> report there is a line showing “Unrealized Losses” of S$230.42, which
> seems to have come out of nowhere. Note that this line does not correspond
> to any account, but is something that the report has automatically added,
> and it is causing a mismatch between Debits and Credits. Does anyone know
> why a Trial Balance report would show a line like this? Is this a bug? I
> saw the following conversation on gnucash-dev that seems to be discussing
> something similar, but I’m not sure.
> >
> >
> >
> > http://gnucash.1415818.n4.nabble.com/Re-trial-balance-
> how-to-find-mismatch-question-td4697393i20.html
> >
> >
> >
> > There are a few other things to note about my situation. First, I
> should say that I’m running GnuCash 2.6.19 on Mac OS 10.13.3. Second, I
> have no investment accounts or stocks in this set of accounts, so I don’t
> have any unrealized losses due to that. Finally, I am using two currencies
> (USD and SGD), and I do have a small loss (of S$3.58 I think) that I have
> not yet accounted for. I saw mention of multiple currencies in the thread I
> linked to above. Could this be causing the problem?
> >
> >
> >
> > Thanks for any help or advice. I’m hoping to get around this problem
> and close my books for 2017.
> >
> > -Richard
> >
> >
> >
> > ----------------------------
> >
> > Richard
> >
> > richardcd73 at gmail.com
> >
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