[GNC] Accounting Working with multiple currencies

[davidcousens49 at gmail.com]

There are a number of issues with your bookkeeping.  

The first major one is that when a book is sold you are debiting a Revenue
account and crediting an A/R (accounts receivable) account. This is incorrect
When you sell a book you are increasing the balance of the revenue/income
account and simulataneously increasing the balance of the A?R account.  An
income/revenue account requires a credit entry to increase its balance and an
asset account like A/R will require a debit entry to increase its balance. If
this is unclear read the chapter on the basics in the Tutorial and Concepts and
Guide(https://www.gnucash.org/docs/v4/C/gnucash-guide/part.getting_started.html)
.  Both of these accounts would appear to be in CAD yet you have entries in USD
to both of the CAD accounts.  That won't work. The currency conversion works
when one entry in a transaction is to an account which has a base currency in
USD and the other entry/entries of the transaction is to an account in CAD 

Similarly when the money is paid into your paypal account which you are treating
as an asset, then it is a debit entry in USD to the Paypal (USD) account not a
credit entry. This is again a reversal of normal accounting practice.

Does Paypal operate the account as a CAD account and convert the transactions
from USD to CAD for you or is the base currency of the PayPal account as
operated by Paypal in USD? Does Paypal report to you in CAD or USD?. Is the
payment into the Paypal account from IS/IL itemized by each sale or simply a
total USD amount. 
 
Is your Sales report from IS in USD? The timing of the currency conversion is
going to be important and which accounts it takes place in. That detremines the
currency conversion rate which applies and the date at which it applies.

You really need to get professional advice on how best to handle the currency
conversions and accounting for them from a local accountant in Canada and
particularly with how to deal with the relationship between publisher and
retailer in the US. The details of how you handle this will also depend on the
contractual arrangements you have  with IS and IL ( and Paypal) and the authors.


It will also depend on when under Canadian law, your revenue is considered to be
earned (at the time of the sale, when IS/IL reports the sale to you, or when you
get paid?) which may also depend whether your business operates under Canadian
tax law as an accrual or cash accounting business. Similar considerations will
likely arise as to when your liability to the author is incurred and when it
should be recorded.

David Cousens


On Sun, 2022-02-20 at 18:17 -0700, Tinker Books wrote:
> I have been struggling with this for three years and have managed to make
> one transaction/transfer form a USD account to the default currency.
> I am a publisher in Canada, so my default currency has to be CAD for income
> tax etc. and I sell books via a Print-on-Demand wholesale distributor in
> the US, IngramSpark [IS] which distributes my books to a multitude of
> retailers worldwide, [IS] , which reports sales in multiple currencies,
> primarily USD and because I receive the payment directly to my PayPal
> account in USD 3 months after the date of the sale, which is how long the
> retail customer has to return books. Print books are printed and shipped by
> LightningSource [LS] which has printing facilities in various locations
> around the globe.
> 
> So the sales path is:
> 
>    1. Retailers order Print books from [IS] or sell an ebook. If they sell
>    an ebook they at some point report the sale to [IS] who then report the
>    sale to me.
>    If a print book is ordered by a retailer then [IS] has the book(s)
>    printed and shipped from the nearest location.
>    At the end of each month I get a monthly sales report which tells me how
>    many books were sold and how much money they owe me after the wholesale
>    discount, printing and shipping costs have been deducted from the retail
>    price which can vary depending on the retailer and the country a book is
>    printed in.
>    2. Ninety days after the end of the month the sale was made, either [IS]
>    or [LS] direct deposits my proceeds in my PayPal (USD) account.
>    3. Upon receiving payment I owe the author their percentage AKA royalty
>    of the profit. So when I get paid $10 (USD)for Book Title1 then I owe the
>    Author $5 (USD) as per contract.
> 
> 
> So when I receive a monthly sales report I enter the amount of the sales
> (for each author/book title) under:
> Revenue (CAD)
> ^Book Sales
> ^:Authors
> ^Author 1:
> ^Book title 1 (USD) Debit entry
> 
> Credit entry
> Accounts Receivable (CAD)
> ^[IS] USD Credit entry
> 
> When I receive the payment for a sale Eg. $10 USD it is paid to my PayPal
> in USD, then I need to enter a split transaction:
> 
>    - Assets>Paypal (CAD)>Paypal (USD) -Credit entry $10 (USD)
>    - AccountReceivable (Cad)> [IS] (USD) -Debit Entry $10 (USD)
>    - Expenses (CAD)> Cost of books sold (CAD)> Author 1 royalty- Debit $5
>    (USD)
>    - Accounts Payable (CAD)> Author1 total royalty (CAD) >Book Title 1
>    (USD) Credit $5 (USD)
> 
> The trouble I am having is When I try to set up the exchange rates, and the
> account types, it isn't working. When I enter an amount in a USD child
> account it automatically enters the same amount in the parent (CAD) account.
> Now that I have installed Strawberry Perl and GnuCash 4.9 things should be
> a lot easier but I am confused about
> 
>    - setting up the Tools Menu>Pricing.
>    - Trading Currency exchange
>    - Or whatever I need to do to get this to work so that I can generate
>    reports in CAD for income tax filing
>    - How can I generate reports for my authors in their country's
>    currency. Note that Author 1 is in England (GBP)
>    - How can I do this so that when I enter a (USD) amount in a child
>    account and have it automatically reflect the correct amount in CAD in the
>    parent account, without making a multitude of entries for each transaction
>    by Manually entering the exchange rate in pricing.
>    - So far the Help>About still shows Finance::Quote- even after running
>    the Start menu>Gnucash>Install Online Price Retrieval.
> 
> Dealing with multiple authors who each might have multiple titles published
> is turning out to be awfully complicated.
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