[GNC] Confused by report "Price Source" when recording bills in a foreign currency

[David T.]

Christian,

While it may be, strictly speaking, unnecessary to create currency-specific expense accounts, it may yet be useful to do so. For example, if you maintain a bank account in one currency, and a second bank account in a different currency, you may wish to track ongoing expenses entirely in either currency. 

Say I have a bank account in USD, and a second bank account in INR. While I am in India, I transfer cash from USD to INR using a bank transfer. For purposes of the example, assume that this exchange rate is USD 1 : INR 70. I enter the transfer into GnuCash, and it prompts me to settle the exchange rate, which I do. Now, several days later, I go to a grocery store in India, and use my local bank card to pay for the INR 2,000 charge. On this day, the exchange rate is 73 INR to 1 USD. It doesn’t seem to make sense that I take a transaction that is entirely in rupees and translate it back into dollars in Expenses:Groceries; at the time I am entering the groceries transaction, I may have no recollection of the exchange rate I used when purchasing the original rupees. This will become even more complicated if I have made multiple transfers from USD to INR, each at its own exchange rate. There is quite literally no way for me to track which rupees (at which exchange rate) got used when. I’ll note that the spot rates for such a purchase are guaranteed to be wrong, since the exchange rate at the time of the transaction is not, in fact, the exchange rate at which I obtained the INR in the first place. The value of my rupees was set when I made the initial transfer, not at subsequent points along the way. 

Using trading accounts may manage this for me (I haven’t tried), but it seems so much more complicated than simply tracking the expenses in Expenses:Groceries:INR.

David

> On Mar 29, 2019, at 4:20 AM, Christian Kluge <frakturfreak at gmail.com> wrote:
> 
> Hi,
> 
> Am 26.03.2019 um 17:36 schrieb James Walker:
> 
> 
>>  *   Created a USD expenses account for the company ("Expenses:US Company USD")
> 
> 
> This is totally unnecessary. You should only make a conversion on the
> expense side once and this is to GBP. Any rate fluctuation occuring with
> the payment should be solved with correcting income and expense account.
> 
> I’ve said time and time again, that in my view only assets and
> liabilities should be in foreign currencies.
> 
> Using your example with the spot rates of the 25th to 27th provided by
> the Bank of England and assuming payment on the same day and leaving out
> the trading accounts I would proceed as follows:
> 
> Invoice 1:
> By Expenses:US Company                                   £10.91
>  to Liabilities:Current Liabilities:Trade Creditors USD         $14.40
> 
> Invoice 2:
> By Expenses:US Company                                   £10.89
>  to Liabilities:Current Liabilities:Trade Creditors USD         $14.40
> 
> Invoice 3:
> By Expenses:US Company                                   £10.92
>  to Liabilities:Current Liabilities:Trade Creditors USD         $14.40
> 
> Payment 1:
> By Liabilities:Current Liabilities:Trade Creditors USD   $14.40
>  to Assets:Current Assets:Bank                                  £10.61
>  to Income:Foreign Exchange Fluctuation                          £0.30
> 
> Payment 2:
> By Liabilities:Current Liabilities:Trade Creditors USD   $14.40
>  to Assets:Current Assets:Bank                                  £10.87
>  to Income:Foreign Exchange Fluctuation                          £0.02
> 
> Payment 3:
> By Liabilities:Current Liabilities:Trade Creditors USD   $14.40
> by Expense:Foreign Exchange Fluctuation                   £0.10
>  to Assets:Current Assets:Bank                                  £11.02
> 
> 
> 
> Kind regards
> 
> 
> Christian Kluge
> 
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