[GNC] Multiple currencies involved - how to correctly deal with it?

[Michael or Penny Novack]

Uh ---- let's for the moment forget the multiple currencies.

Rather than that, let's examine basic accounting as applied to "sales" 
<<from some inventory of goods>>

You would have an account of type assets for inventory << might or might 
not have sub accounts for individual items in a case like yours, 
particularly, as I recall, you might have expenses refurbishing 
instrument --- would be a debit to basis and a credit to "refurbishing 
expense >>

You would have an income account "sales" and an expense account "cost of 
gods sold.

Lets say you acquire a flute for 20 ducats and spend 2 ducats getting it 
refurbished. So you had two transactions, debit flute and credit cash 10 
ducats and debit flute credit refurbishing expenses 2 ducats.

Later you sell the flute for 11 ducats << you had a loss >>   You debit 
cash and credit sales 11 ducats and at the same time debit cost of goods 
sold and flute 12 ducats .

IF those were the only income and expense accounts you had and this was 
the only business you had during the period and you ran an "Income 
Statement" (aka "Profit and Loss") that report would indeed show you the 
loss << you had income of 11 ducats but expenses of 12 ducats so lost a 
ducat >>

Michael D Novack

PS --- you want to understand not only that you had a loss but why << 
did you pay too much to acquire the object, too much to refurbish it for 
sale, etc. >>



On 6/16/2025 3:46 PM, Boniforti Flavio wrote:
> Hi Richard and thanks for replying.
> I do already have a "Income:Music Equipment Sales CHF" account, but perhaps
> I don't think it's correct to add a "decrease" in that account of CHF 32.-
> (which is the loss I suffered). Probably it's a matter of perspective... I
> could create a separate "Expenses:Music Equipment Sales Loss CHF" and put
> that amount in there? But in the latter case, it would be a positive
> number, whereas I think it really is a negative number (loss) - and
> therefore it would still be the best thing to put it in the "Income:Music
> Equipment Sales CHF" as a negative entry?!
>
> TIA,
> F.
>
> https://www.instagram.com/boniforti_music
> https://soundcloud.com/boniforti_music
> https://bonny-j.bandcamp.com
>
>
> Am Mo., 16. Juni 2025 um 19:23 Uhr schrieb R Losey <rlosey at gmail.com>:
>
>>
>> On Mon, Jun 16, 2025 at 6:00 AM Boniforti Flavio <boniforti.f at gmail.com>
>> wrote:
>>
>>> Hi all.
>>>
>>> I've got a collection of (vintage) music instruments - I have an account
>>> for each item, where I put the money I've spent to buy such items. Each
>>> item is a sub-account of a super-account "Instrument collection" - and I
>>> got 2 of them: one in CHF and the other in EUR.
>>> I've also got different bank accounts for CHF and EUR of course.
>>>
>>> Let's pick this example, where I'm struggling to put the numbers in the
>>> correct accounts:
>>> - Item ABC, sub-account of the CHF "instrument collection", bought for CHF
>>> 79.- (which I've entered as "opening balance");
>>> - selling this item in EUR, therefore I've received money to increase my
>>> EUR checking account;
>>> - no shipping costs involved this time (the intermediary took 57 Euros
>>> from
>>> the buyer and sent me 50 Euros, the other 7 Euros were already used by the
>>> intermediary to buy and send me a shipping label).
>>>
>>> Now the question is: how should I correctly enter all the different
>>> transactions? My approach would've been:
>>> - increase my EUR checking account of 50 Euros - the corresponding account
>>> would be "item ABC";
>>> - at this point the account "item ABC" still shows a positive value -
>>> which
>>> cannot be true as I've sold it, so it's not anymore in my possession. How
>>> do I register this loss?
>>>
>> I remember your post from last year; I'm only going to attempt an answer
>> to the first case in this email.
>>
>> I assume that item ABC, purchased in CHF is listed in CHF. When you sold
>> it, presumably it lowered the item ABC balance. However, because you sold
>> in EUR, how did you mark that in item ABC? Did you convert EUR to CHF for
>> the date of the sale, and then use that number?
>>
>> (Assuming that you converted EUR to CHF), you'll want to move the
>> remaining balance to either an Income account called something like
>> "Instrument Gain" or an Expense account called "Instrument Loss".
>> Personally, I favor the Income account, os I would think that it would be
>> more usual to sell the instruments for gain. Of course, you could have one
>> of each and put the gains in one and the losses in another. (If I were
>> doing it, I'd have a single Income account; however, you might need one in
>> CHF and one in EUR, if instruments have been purchased under both
>> currencies).
>>
>> So, using your numbers above (and looking up current exchange rates and
>> simplifying for example), I'd enter
>>
>>        Increase EUR checking by 50 EUR
>>        Decrease Item ABC by 47 CHF [about what 50 EUR is - you should use
>> the real value; I'm using this for the example]
>>        Decrease item ABC by 32 CHF [the remaining value]
>>        Record a loss (decrease, I Think) in the Income account "Instrument
>> Gain" by 32 CHF
>>
>> That should leave you with zero value for item ABC (which you could now
>> "hide" the account so you don't see it).
>>
>> Note that you could merely enter ONE entry into item ABC, decreasing by 79
>> (the total value), but I did the above in two entries to (hopefully) make
>> it clearer.
>>
>> I seem to remember from your earlier post that you are not concerned with
>> tax consequences of the sale, so I that didn't influence my thinking.
>>
>> I hope this helps you.
>>
>>
>> --
>> _________________________________
>> Richard Losey
>> rlosey at gmail.com
>> Micah 6:8
>>
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