Foreign currency accounts and transactions.

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Foreign currency accounts and transactions.

Adam Funk
I'm experimenting with gnucash (1.8.12) to see if it will work for me,
and I need to figure out how to handle bank accounts in foreign
currency coherently.

In my test setup, the main currency is GBP and I have an account
'Assets:Current Assets:ABC Checking' of type Bank, commodity USD.  (At
this point, all the other accounts are in GBP.)  I wrote a check in it
for $45 and in the split balanced it with Expenses:Books.

In the account summary and in the reports I generated, ABC Checking
dropped by USD45.00 but Expenses:Books still showed GBP0.00.  How in
the world can this balance?

In the list archive I found a note [1] to the effect that an exchange
rate has to be set for every transaction.  So I went back into the ABC
Checking account, right-clicked on the Expenses:Books line of the
split, and used "Edit Exchange Rate" to set 0.55.  Now Expenses:Books
shows GBP24.75.

So I have a few questions:

Is it necessary to "Edit Exchange Rate" for every transaction that
isn't in the main currency?  Or should it pick up the previous value,
or the value from the Price Editor?

If I have to "Edit Exchange Rate" every time, can I configure gnucash
to remind me, so I don't get transactions that cost USD45 in one
account and GBP0.00 in another?

How in the world can the accounts balance when I forget to E-E-R?

Should a bank account in a foreign currency have account type Bank or
Currency?


Thanks,
Adam


[1]
https://lists.gnucash.org/pipermail/gnucash-user/2004-November/011992.html

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Re: Foreign currency accounts and transactions.

Derek Atkins
Adam Funk <[hidden email]> writes:

> Is it necessary to "Edit Exchange Rate" for every transaction that
> isn't in the main currency?  Or should it pick up the previous value,
> or the value from the Price Editor?

You need to set it for every transaction.  It SHOULD happen
automatically, but apparently there are bugs where this does not
happen properly in all cases.

> If I have to "Edit Exchange Rate" every time, can I configure gnucash
> to remind me, so I don't get transactions that cost USD45 in one
> account and GBP0.00 in another?

See above..

> How in the world can the accounts balance when I forget to E-E-R?

The TRANSACTION is balanced, which is all GnuCash is checking at the
moment.  However it's not balancing in terms of changes-in-capital.
But GnuCash doesn't check that now.

> Should a bank account in a foreign currency have account type Bank or
> Currency?

Bank.  You should never use Currency type accounts, and indeed in 2.0
those accounts no longer exist.

> Thanks,
> Adam
>
>
> [1]
> https://lists.gnucash.org/pipermail/gnucash-user/2004-November/011992.html

-derek

--
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Re: Foreign currency accounts and transactions.

Adam Funk
On 2006-09-07, Derek Atkins <[hidden email]> wrote:

>> Is it necessary to "Edit Exchange Rate" for every transaction that
>> isn't in the main currency?  Or should it pick up the previous value,
>> or the value from the Price Editor?
>
> You need to set it for every transaction.  It SHOULD happen
> automatically, but apparently there are bugs where this does not
> happen properly in all cases.

I'll do a few more in the same place and see what happens.


>> How in the world can the accounts balance when I forget to E-E-R?
>
> The TRANSACTION is balanced, which is all GnuCash is checking at the
> moment.  However it's not balancing in terms of changes-in-capital.
> But GnuCash doesn't check that now.

I think I see what you mean.  I think it treated the transaction
without EER as having a value of GBP0.00 in the relevant Expenses
account.


>> Should a bank account in a foreign currency have account type Bank or
>> Currency?
>
> Bank.  You should never use Currency type accounts, and indeed in 2.0
> those accounts no longer exist.

Noted.  And I'll need a separate account of type Cash for each foreign
currency I have in my desk, right?


Thanks,
Adam

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Re: Foreign currency accounts and transactions.

Adam Funk
On 2006-09-07, Adam Funk <[hidden email]> wrote:

>>> Is it necessary to "Edit Exchange Rate" for every transaction that
>>> isn't in the main currency?  Or should it pick up the previous value,
>>> or the value from the Price Editor?
>>
>> You need to set it for every transaction.  It SHOULD happen
>> automatically, but apparently there are bugs where this does not
>> happen properly in all cases.
>
> I'll do a few more in the same place and see what happens.

>>> How in the world can the accounts balance when I forget to E-E-R?
>>
>> The TRANSACTION is balanced, which is all GnuCash is checking at the
>> moment.  However it's not balancing in terms of changes-in-capital.
>> But GnuCash doesn't check that now.
>
> I think I see what you mean.  I think it treated the transaction
> without EER as having a value of GBP0.00 in the relevant Expenses
> account.

I tried it a few more times in the same USD account.  If I don't EER
each transaction, it shows up as GBP0.00 in the expense account!
(Fortunately the EER window comes up with the previous value
pre-loaded.)  Is this a reportable bug?

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Re: Foreign currency accounts and transactions.

Derek Atkins
Adam Funk <[hidden email]> writes:

> On 2006-09-07, Adam Funk <[hidden email]> wrote:
>
>>>> Is it necessary to "Edit Exchange Rate" for every transaction that
>>>> isn't in the main currency?  Or should it pick up the previous value,
>>>> or the value from the Price Editor?
>>>
>>> You need to set it for every transaction.  It SHOULD happen
>>> automatically, but apparently there are bugs where this does not
>>> happen properly in all cases.
>>
>> I'll do a few more in the same place and see what happens.
>
>>>> How in the world can the accounts balance when I forget to E-E-R?
>>>
>>> The TRANSACTION is balanced, which is all GnuCash is checking at the
>>> moment.  However it's not balancing in terms of changes-in-capital.
>>> But GnuCash doesn't check that now.
>>
>> I think I see what you mean.  I think it treated the transaction
>> without EER as having a value of GBP0.00 in the relevant Expenses
>> account.
>
> I tried it a few more times in the same USD account.  If I don't EER
> each transaction, it shows up as GBP0.00 in the expense account!
> (Fortunately the EER window comes up with the previous value
> pre-loaded.)  Is this a reportable bug?

See above.  "It SHOULD happen automatically, but apparently there
are bugs where this does not happen properly in all cases".

-derek

--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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Foreign currency exchange rate settings

Norbert Klein-2
Derek Atkins wrote:

> Adam Funk <[hidden email]> writes:
>
>  
>> On 2006-09-07, Adam Funk <[hidden email]> wrote:
>>
>>    
>>>>> Is it necessary to "Edit Exchange Rate" for every transaction that
>>>>> isn't in the main currency?  Or should it pick up the previous value,
>>>>> or the value from the Price Editor?
>>>>>          
>>>> You need to set it for every transaction.  It SHOULD happen
>>>> automatically, but apparently there are bugs where this does not
>>>> happen properly in all cases.
>>>>        
>>> I'll do a few more in the same place and see what happens.
>>>      
I am new on the list, and fairly new to using GnuCash - 1.8.9 - and
naturally I have a number of still unsolved problems. As I live in
Cambodia and travel outside of the country from time to time, I do need
different currencies - but I was not able to find a way which would
avoid that for every multi-currency entry I make, I have to go to the
Internet first and find the exchange rate. Probably there is somewhere a
way to save it somewhere for repeated use (and adjust the rate only from
time to time as it may be changing) - but I was not able to achieve this
so far. Any advice would be very welcome.

Norbert
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Re: Foreign currency exchange rate settings

Derek Atkins
Norbert Klein <[hidden email]> writes:

> I am new on the list, and fairly new to using GnuCash - 1.8.9 - and
> naturally I have a number of still unsolved problems. As I live in
> Cambodia and travel outside of the country from time to time, I do need
> different currencies - but I was not able to find a way which would
> avoid that for every multi-currency entry I make, I have to go to the
> Internet first and find the exchange rate. Probably there is somewhere a
> way to save it somewhere for repeated use (and adjust the rate only from
> time to time as it may be changing) - but I was not able to achieve this
> so far. Any advice would be very welcome.

The way to avoid it for EVERY transaction is to have, effectively,
multiple sets of accounts (one for each currency)..  So you have
effectively a Currency_N Asset Account and then a set of Currency_N
Income and Expense accounts.  So every time you're working
specifically in Currency N you use the Currency_N accounts.  When you
transfer between Currency_N and Currency_X, then you need the specific
exchange rate of that transaction.

The gnucash exchange rate dialog WILL remember the last exchange rate
you used (based on the transaction date) so it should offer you that
exchange rate first.  But yes, every multi-currency transaction MUST
have an exchange rate entered at the time the transaction is created.
That's because the exchange rate is a fundamental aspect of the
specific transaction.

For example, if I exchange US$100 for CA$120, there IS only a single
exchange rate for that transaction (1.2).  This rate is fundamental to
the transaction.  It's not something that I can lookup later and fill
in, because the transaction has no meaning without the exchange rate.

However, if someone hands me CA$120 and I keep that Canadian currency
in my hand, there's been no exchange of currencies, so technically I
should store that CA$120 in a CAD-based Asset Account (Cash, in this
case).

Note that there are exceptions to this.  For example a foreign
currency credit card transaction has an exchange rate that you
probably DO have to lookup later.  For example if I'm traveling to the
Japaen and spend ¥8500 on dinner and put in on my UD$ Credit Card, I
wont know the exchange rate until that charge is actually posted to my
account (or when I get my bill at the end of the month).  So in this
case I probably need to delay entering the transaction, or I need to
"guess" the rate and then adjust it later.  Note that adjusting it
later is a little more challenging, because gnucash really does try to
keep everything in balance, so you have to adjust both the exchange
rate AND the actual value in the register at the same time!

> Norbert

-derek

--
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       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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Re: Foreign currency exchange rate settings

Adam Funk
On 2006-09-10, Derek Atkins <[hidden email]> wrote:

> Note that there are exceptions to this.  For example a foreign
> currency credit card transaction has an exchange rate that you
> probably DO have to lookup later.  For example if I'm traveling to the
> Japaen and spend ¥8500 on dinner and put in on my UD$ Credit Card, I
> wont know the exchange rate until that charge is actually posted to my
> account (or when I get my bill at the end of the month).  So in this
> case I probably need to delay entering the transaction, or I need to
> "guess" the rate and then adjust it later.  Note that adjusting it
> later is a little more challenging, because gnucash really does try to
> keep everything in balance, so you have to adjust both the exchange
> rate AND the actual value in the register at the same time!

I was recently thinking about this as part of my preparation for using
GnuCash, and I had been planning to handle foreign credit card
transactions as follows:

1. Suppose I order EUR50 from amazon.fr, using a credit card that's
   billed in GBP (which is also my main currency).

2. Enter a transaction in that credit card's register with "EUR50" in
   the description or memo with an estimated GPB amount (say GBP33)
   debited to the credit card and credited to Expenses:Books (which is
   also denominated in GBP).  All the accounts are close to what will
   be their correct values.

3. When I check the bill on-line or get the statement, I see that I've
   been charged GBP34.08, so I amend both halves of the transaction to
   that number.  Now the credit card register will be exactly
   reconcilable with my statement, and Expenses:Books will be correct.

This doesn't involve 'Edit Exchange Rate' at all, and the EUR amount
is in the memo or description if I need to refer to it later.  To me
this approach seems straightforward.  Is it wrong?

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Re: Foreign currency accounts and transactions.

Adam Funk
In reply to this post by Derek Atkins
On 2006-09-08, Derek Atkins <[hidden email]> wrote:

>> I tried it a few more times in the same USD account.  If I don't EER
>> each transaction, it shows up as GBP0.00 in the expense account!
>> (Fortunately the EER window comes up with the previous value
>> pre-loaded.)  Is this a reportable bug?
>
> See above.  "It SHOULD happen automatically, but apparently there
> are bugs where this does not happen properly in all cases".

OK, I tried it several times in the same account and it /never/
happened automatically!

What concerns me about this is that if I forget to EER, there won't be
any warnings and my expenses will be inaccurate --- but I suppose the
way to check it is to run a transaction report looking for anything
with a 0.00 value in the Expenses tree?

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Re: Foreign currency exchange rate settings

Derek Atkins
In reply to this post by Adam Funk
Adam Funk <[hidden email]> writes:

> I was recently thinking about this as part of my preparation for using
> GnuCash, and I had been planning to handle foreign credit card
> transactions as follows:
>
> 1. Suppose I order EUR50 from amazon.fr, using a credit card that's
>    billed in GBP (which is also my main currency).
>
> 2. Enter a transaction in that credit card's register with "EUR50" in
>    the description or memo with an estimated GPB amount (say GBP33)
>    debited to the credit card and credited to Expenses:Books (which is
>    also denominated in GBP).  All the accounts are close to what will
>    be their correct values.
>
> 3. When I check the bill on-line or get the statement, I see that I've
>    been charged GBP34.08, so I amend both halves of the transaction to
>    that number.  Now the credit card register will be exactly
>    reconcilable with my statement, and Expenses:Books will be correct.
>
> This doesn't involve 'Edit Exchange Rate' at all, and the EUR amount
> is in the memo or description if I need to refer to it later.  To me
> this approach seems straightforward.  Is it wrong?

This approach would certainly work when you're buying goods..  But
it doesn't work when you're actually buying the currency.

-derek
--
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       Member, MIT Student Information Processing Board  (SIPB)
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Re: Foreign currency exchange rate settings

Maf. King
In reply to this post by Adam Funk
On Monday 11 September 2006 13:43, Adam Funk wrote:

> 1. Suppose I order EUR50 from amazon.fr, using a credit card that's
>    billed in GBP (which is also my main currency).
>
> 2. Enter a transaction in that credit card's register with "EUR50" in
>    the description or memo with an estimated GPB amount (say GBP33)
>    debited to the credit card and credited to Expenses:Books (which is
>    also denominated in GBP).  All the accounts are close to what will
>    be their correct values.
>
> 3. When I check the bill on-line or get the statement, I see that I've
>    been charged GBP34.08, so I amend both halves of the transaction to
>    that number.  Now the credit card register will be exactly
>    reconcilable with my statement, and Expenses:Books will be correct.
>
> This doesn't involve 'Edit Exchange Rate' at all, and the EUR amount
> is in the memo or description if I need to refer to it later.  To me
> this approach seems straightforward.  Is it wrong?
>

FWIW, I do exactly what you describe above when buying goods abroad on credit
card. (mostly vacations these days, but in the past for business expenses
too)  

I tend to not monitor cash too closely, and just have a transaction like:
Bank:Current: (Bought some EUR):  -202.00
Expense:FinanceCharge: +2.00
Expense:Holiday: +200 (GBP)

Then later on, there may be some currency left over after the trip, which I
handle as a "negative expense": eg.
Bank:Current: (Left over EUR): +25.00
Expense:Holiday: -25.00  (GBP)

I figure that the only time the exchange rate counts is at the point the
transaction takes place - for cash, it is when you exchange the money (_not_
when you actually buy goods), but on a credit card, it will be at some random
time after you have bought the goods, when all the involved banks etc. have
done whatever they need to... Estimating and then correcting card
transactions seems to me to be the easiest way to keep track of how big the
card bill will eventually be.

HTH,
Maf.
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Re: Foreign currency exchange rate settings

Adam Funk
In reply to this post by Derek Atkins
On 2006-09-11, Derek Atkins <[hidden email]> wrote:

>> I was recently thinking about this as part of my preparation for using
>> GnuCash, and I had been planning to handle foreign credit card
>> transactions as follows:
>>
>> 1. Suppose I order EUR50 from amazon.fr, using a credit card that's
>>    billed in GBP (which is also my main currency).
>>
>> 2. Enter a transaction in that credit card's register with "EUR50" in
>>    the description or memo with an estimated GPB amount (say GBP33)
>>    debited to the credit card and credited to Expenses:Books (which is
>>    also denominated in GBP).  All the accounts are close to what will
>>    be their correct values.
>>
>> 3. When I check the bill on-line or get the statement, I see that I've
>>    been charged GBP34.08, so I amend both halves of the transaction to
>>    that number.  Now the credit card register will be exactly
>>    reconcilable with my statement, and Expenses:Books will be correct.
>>
>> This doesn't involve 'Edit Exchange Rate' at all, and the EUR amount
>> is in the memo or description if I need to refer to it later.  To me
>> this approach seems straightforward.  Is it wrong?
>
> This approach would certainly work when you're buying goods..  

That's the only thing I meant!  So it's OK for that?

> But it doesn't work when you're actually buying the currency.

Of course not!  I'm planning to have an "Cash EUR" account in Assets,
so if I make an ATM withdrawal of EUR100 from my UK bank account, I
know I'll have to handle it "the complicated way".

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Re: Foreign currency accounts and transactions.

Adam Funk
In reply to this post by Adam Funk
If you have to remember to "Edit Exchange Rate" for every transaction
that affects an account denominated in another currency, what is the
function of the "Price Editor"?

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Re: Foreign currency exchange rate settings

Derek Atkins
In reply to this post by Adam Funk
Adam Funk <[hidden email]> writes:

>> This approach would certainly work when you're buying goods..  
>
> That's the only thing I meant!  So it's OK for that?

Yes.

-derek

--
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Re: Foreign currency accounts and transactions.

Derek Atkins
In reply to this post by Adam Funk
Adam Funk <[hidden email]> writes:

> If you have to remember to "Edit Exchange Rate" for every transaction
> that affects an account denominated in another currency, what is the
> function of the "Price Editor"?

The Price Editor is used for present value..  Think about a foreign
currency in the same way as you would think about a stock.  If you're
holding onto a foreign currency you probably want to know how much
that holding is worth in your home currency.  The Price Editor tells
you that, then current value of the holding.

The EER, however, is used to compute the actual basis (purchase
price) and gain/loss (sale price) of that foreign currency.
The one place where the EER and Price Editor is tied together
is that the EER will save the current price into the PriceDB,
and it will use the most recent price from the PriceDB as the
"default" entry.  But it's still the actual EER price that matters
for your basis/gain.

I hope this clears up your confusion.

-derek
--
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       Member, MIT Student Information Processing Board  (SIPB)
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Re: Foreign currency accounts and transactions.

Adam Funk
On 2006-09-12, Derek Atkins <[hidden email]> wrote:

> The Price Editor is used for present value..  Think about a foreign
> currency in the same way as you would think about a stock.  If you're
> holding onto a foreign currency you probably want to know how much
> that holding is worth in your home currency.  The Price Editor tells
> you that, then current value of the holding.

So the Price Editor is used to generate the GBP (in my case) value
that appears in reports for non-main-currency accounts
(e.g. Assets:Cash:Euros or Assets:Investments:YoyodyneShares).


> The EER, however, is used to compute the actual basis (purchase
> price) and gain/loss (sale price) of that foreign currency.

And the EER is used to set the GBP value in a GBP account
(e.g. Expenses:Books) of a transaction initiated in a non-GBP account
(Assets:Cash:Euros).


> The one place where the EER and Price Editor is tied together
> is that the EER will save the current price into the PriceDB,
> and it will use the most recent price from the PriceDB as the
> "default" entry.  But it's still the actual EER price that matters
> for your basis/gain.

So I need to enter rates directly into the Price Editor only when the
value of the currency or share has changed significantly (in my
opinion) since the last transaction and I want those assets and
liabilities to be revalued --- right?


> I hope this clears up your confusion.

Yes, I think so!  Thanks again.

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Re: Foreign currency accounts and transactions.

Derek Atkins
Quoting Adam Funk <[hidden email]>:

> On 2006-09-12, Derek Atkins <[hidden email]> wrote:
>
>> The Price Editor is used for present value..  Think about a foreign
>> currency in the same way as you would think about a stock.  If you're
>> holding onto a foreign currency you probably want to know how much
>> that holding is worth in your home currency.  The Price Editor tells
>> you that, then current value of the holding.
>
> So the Price Editor is used to generate the GBP (in my case) value
> that appears in reports for non-main-currency accounts
> (e.g. Assets:Cash:Euros or Assets:Investments:YoyodyneShares).

Pretty much, yes.

>> The EER, however, is used to compute the actual basis (purchase
>> price) and gain/loss (sale price) of that foreign currency.
>
> And the EER is used to set the GBP value in a GBP account
> (e.g. Expenses:Books) of a transaction initiated in a non-GBP account
> (Assets:Cash:Euros).

Pretty much, yes.

>> The one place where the EER and Price Editor is tied together
>> is that the EER will save the current price into the PriceDB,
>> and it will use the most recent price from the PriceDB as the
>> "default" entry.  But it's still the actual EER price that matters
>> for your basis/gain.
>
> So I need to enter rates directly into the Price Editor only when the
> value of the currency or share has changed significantly (in my
> opinion) since the last transaction and I want those assets and
> liabilities to be revalued --- right?

Revalued in the Reports, yes.  Changing the value in the PriceDB
will not change what appears in your registers.

>> I hope this clears up your confusion.
>
> Yes, I think so!  Thanks again.

Great!  Maybe someone else will learn from it, too.

-derek
--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available

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Re: Foreign currency accounts and transactions.

Adam Funk
On 2006-09-12, Derek Atkins <[hidden email]> wrote:

>> So I need to enter rates directly into the Price Editor only when the
>> value of the currency or share has changed significantly (in my
>> opinion) since the last transaction and I want those assets and
>> liabilities to be revalued --- right?
>
> Revalued in the Reports, yes.  Changing the value in the PriceDB
> will not change what appears in your registers.

That's what I meant.  All clear now, thanks!

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Re: Foreign currency accounts and transactions.

Adam Funk
In reply to this post by Derek Atkins
On 2006-09-07, Derek Atkins <[hidden email]> wrote:

>> How in the world can the accounts balance when I forget to E-E-R?
>
> The TRANSACTION is balanced, which is all GnuCash is checking at the
> moment.  However it's not balancing in terms of changes-in-capital.
> But GnuCash doesn't check that now.

Does this mean that if (for example)

1. at the end of August, I have USD100 in Assets:Cash:USD and the most
   recent rate in the price editor is 0.55, so my balance sheet shows
   GBP55.00 in that account;

2. at the end of September, I still have USD100 there, but I've added
   a newer rate of 0.58, so my balance sheet shows GBP58.00 in that
   account;

then

3. the value of that asset has risen by GBP3.00 but without anything
   in the Income accounts to match it?

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Re: Foreign currency accounts and transactions.

sunfish62
Adam--

I might be wrong on this (usually I am), but it would seem to me that
Assets:Cash:USD has USD100 in it, whether it's the end of August, September, or
the End of Time.

You don't *have* any GBP in that account; it's USD. If you exchange your USD100
for GBP, well, *then* there will be a transaction with an associated exchange
rate, and that will determine the GBP you have. Until that point, however, you
have USD100.

I have heard the term "Unrealized Gains" used for what you're getting at in
#3--they don't exist except in concept.

David


--- Adam Funk <[hidden email]> wrote:

> On 2006-09-07, Derek Atkins <[hidden email]> wrote:
>
> >> How in the world can the accounts balance when I forget to E-E-R?
> >
> > The TRANSACTION is balanced, which is all GnuCash is checking at the
> > moment.  However it's not balancing in terms of changes-in-capital.
> > But GnuCash doesn't check that now.
>
> Does this mean that if (for example)
>
> 1. at the end of August, I have USD100 in Assets:Cash:USD and the most
>    recent rate in the price editor is 0.55, so my balance sheet shows
>    GBP55.00 in that account;
>
> 2. at the end of September, I still have USD100 there, but I've added
>    a newer rate of 0.58, so my balance sheet shows GBP58.00 in that
>    account;
>
> then
>
> 3. the value of that asset has risen by GBP3.00 but without anything
>    in the Income accounts to match it?
>
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