[GNC] Currency Transfers result in Unrealized Gain (or Loss)

[David Warren]

Hi.  I was able to recreate this error.

On Tue, Aug 26, 2025 at 5:57 PM Norm Samuelson <Norm at normsamuelson.com>
wrote:

> I wrote about this recently, and did not get a good explanation. So I
> created a bare-bones demo of what I am trying to understand.
>
> I created two checking accounts, one in CAD and one in USD.  USD is my
> normal currency.
>

USD is your base account currency.  So all P&L will be calculated in USD

>
> I deposited $60,000 into the CAD account.
>

As Michael pointed out, you actually haven't given us enough information.
But I can surmise that what you entered was something like
Debit 60,000 CAD into the Canadian checking account
Credit $45,000 USD into a USD Income account [this would create the
"retained earnings"]
You never said, but I presume that if you entered this transaction as a
multiple currency transaction between USD/CAD that you entered the exchange
rate as 0.75 USD / 1 CAD.


> I transferred $20,000 CAD to the USD account, with an exchange rate of
> 1CAD to .75USD. resulting in $15,000 USD.
>
Later I transferred another $20,000 CAD to the USD account, with an
> exchange rate of 1CAD to .74USD. resulting in $14,800 USD.
>
> That left me with $20,000 CAD and $29,800 USD.
>
> The Balance Sheet shows Unrealized Gains of $200 USD.
>
> I have to assume that the "Unrealized Gain" came because of the change
> in the exchange rate.  The first transfer gave me $200 more than the
> second.  So I gained money on the first transfer by doing it at a better
> exchange rate???  (But I did not "realize" it???)
>
> What I have found is that I can use gnucash, for multiple currencies, in
one of two modes:  turn ON trading accounts, OR I have to enter currency
gains MANUALLY.  There really should be a $400 USD trading LOSS (half
realized, half unrealized) and not any $200 gain.  If you turn on trading
accounts in preferences, and then you have to MANUALLY enter all three
transactions again, you will see extra debits and credits appear in each of
your transactions, and that will result in the trading losses appearing on
your balance sheet and forcing the accounting equation to come back in
balance.  You have $44,600 in assets, no liabilities, $45,000 in your
income->equity account, and then $400 of trading losses.

If you don't want to run trading accounts, you can do it manually, but you
have to do it!  Meaning go back and restate transactions to add the
unrealized and realized currency gains or losses.

Otherwise, I have found that gnucash will NOT force the accounting equation
to be in balance.


> I wind up with Total Assets of $44,600 (the $29,800USD plus the
> $20,000CAD which is now worth $14,000 at the new exchange rate).
>

Think you have typo here and you meant worth $14,800....

>
> Retained Earnings is $45,000 (the initial $60,000 at the early exchange
> rate).
>
> Unrealized Gains is $200
>
> This is clearly wrong.  Try trading accounts and re-enter all
transactions...


> Total Equity is $45,200.  I do NOT understand that, as I do not have
> over $45,000 now, but under $45,000.
>
> I do not have a degree in Accounting.  I simply do not understand how
> the Equity figures are calculated.
>
> I am willing to send the .gnucash file and the balance sheet to anyone
> who can help me understand this.  I would like to learn.
>
> --
> - Norm -
>
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