Recording currency exchange in gnucash
April 10, 2011 10:09 AM Subscribe
I sold my bank some euros for dollars, and had the proceeds deposited in my checking account. How do I record this in gnucash?
I've googled around a bit and seen some pages on how to do this, but I'm just not following them (I am new to both gnucash and double entry bookkeeping). I think I need a more specific explanation.
Let's say I gave my bank 20 euros, cash, and they put $28 in my checking account. Say there was no fee for the exchange.
I never previously recorded the fact that I had those 20 euros in gnucash, so I imagine the first thing I would do would be to set up an account like "Equity: Opening Balances: Foreign Currencies:Euros".
Then another account: "Assets: Current Assets: Foreign Currencies: Euros".
Then I would transfer 20 euros from E:OB:FC:E to A:CA:FC:E.
I'm OK up to there, but now doing the actual exchange is confusing to me. I have a way that I think would more or less work, but I can't help but thinking I'm missing a cleaner way. Here's what I have thought to do:
Set up "Expenses: Currency Exchange: Euros".
Set up "Income: Currency Exchange: Dollars".
Transfer 20 euros from A:CA:FC:E to E:CE:E.
Transfer 28 dollars from I:CE:D to my checking account.
I guess that would work (right?), but my issue with it is that there's no obvious link between the 20 euros and the 28 dollars. Is there a better way?
Thanks in advance for any help.
I've googled around a bit and seen some pages on how to do this, but I'm just not following them (I am new to both gnucash and double entry bookkeeping). I think I need a more specific explanation.
Let's say I gave my bank 20 euros, cash, and they put $28 in my checking account. Say there was no fee for the exchange.
I never previously recorded the fact that I had those 20 euros in gnucash, so I imagine the first thing I would do would be to set up an account like "Equity: Opening Balances: Foreign Currencies:Euros".
Then another account: "Assets: Current Assets: Foreign Currencies: Euros".
Then I would transfer 20 euros from E:OB:FC:E to A:CA:FC:E.
I'm OK up to there, but now doing the actual exchange is confusing to me. I have a way that I think would more or less work, but I can't help but thinking I'm missing a cleaner way. Here's what I have thought to do:
Set up "Expenses: Currency Exchange: Euros".
Set up "Income: Currency Exchange: Dollars".
Transfer 20 euros from A:CA:FC:E to E:CE:E.
Transfer 28 dollars from I:CE:D to my checking account.
I guess that would work (right?), but my issue with it is that there's no obvious link between the 20 euros and the 28 dollars. Is there a better way?
Thanks in advance for any help.
Response by poster: I'm sorry, birdherder, I am not following. I don't understand from what you're saying where the balance comes.
That is, I imagine that you're saying -- and correct me if I'm wrong -- that I should record a transfer directly from "Assets: Current Assets: Foreign Currencies: Euros" to "Assets: Current Assets: Checking". And that that transaction should somehow take 20 euros out of the former and insert 28 dollars into the latter.
But then my books would be out of balance. 20 euros would have disappeared, and 28 dollars appeared, from nowhere. As I said, I am new to double entry bookkeeping, but doesn't this go against its fundamental tenet?
posted by Flunkie at 10:44 AM on April 10, 2011
That is, I imagine that you're saying -- and correct me if I'm wrong -- that I should record a transfer directly from "Assets: Current Assets: Foreign Currencies: Euros" to "Assets: Current Assets: Checking". And that that transaction should somehow take 20 euros out of the former and insert 28 dollars into the latter.
But then my books would be out of balance. 20 euros would have disappeared, and 28 dollars appeared, from nowhere. As I said, I am new to double entry bookkeeping, but doesn't this go against its fundamental tenet?
posted by Flunkie at 10:44 AM on April 10, 2011
You settle on one currency. Your "Assets: Current Assets: Foreign Currencies" are in dollars (valued at whatever the conversion rate is).
posted by birdherder at 10:50 AM on April 10, 2011
posted by birdherder at 10:50 AM on April 10, 2011
Response by poster: I'm sorry, I still do not understand what you mean. I mean, I understand in a general sense, but I do not understand what you are saying I should actually do within gnucash to record this transaction. Could you please be more gnucash-specific?
posted by Flunkie at 10:55 AM on April 10, 2011
posted by Flunkie at 10:55 AM on April 10, 2011
Best answer: You just transfer money from Assets:Current Assets:Foreign Currencies:Euros to your checking account. When you do this, it will recognize that the accounts are denominated in two different currencies, and a dialog box should pop up, asking you for the exchange rate. Assuming you started in the Euros account and told it to transfer €20 to your checking account, you would select "to amount" in the dialog box and enter $28. This will cause the transaction to show up as €20 out when you see it in your Euros account, but $28 in when you see it in your checking account.
posted by one more dead town's last parade at 11:03 AM on April 10, 2011
posted by one more dead town's last parade at 11:03 AM on April 10, 2011
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They aren't expenses or income so you shouldn't account for it that way. When you originally got the euros you made a cash withdrawal and so this is that cash just being put back in. If you have a cash account set up, it would originally debit from it, and then you credit when it comes back.
An expense would be if there were a conversion fee. It would be income if you made money off of the exchange rate changes, or you were paid in euros, or you won it, etc.
posted by birdherder at 10:29 AM on April 10, 2011