Maybe Income:Exchange should instead be Equity:Exchange or something?
In my mind, that money is going into the same place the converted
amounts go when you write a posting like
Income:Investments:PnL -984.48 GBP @ 1.3182 USD
Doesn't that posting use "Equity:Conversions" or something like that
under the hood?
I have been thinking about how to handle a similar situation for
myself: I have bought and sold some stocks in CAD, but need to report
my profit/loss in USD to the IRS. I was thinking I'll just record the
costs in USD --- in the analogy to your situation, that would be GBP.
That doesn't meet your main requirement #2 but I think I'm okay with
that if it makes things simpler.
(I also need to report my gain/loss to Canada in CAD, but for that I
wrote a plugin that adds a separate Canadianese version of everything.)
On Sun, May 02, 2021 at 12:42:31PM +0100, Caesar Schinas wrote:
> Thanks! That makes it much clearer to me what you’re suggesting, thanks for
> the time and effort to produce that concrete example.
>
> The one thing that doesn’t make sense to me is the exchange rate “gain” – so
> far as I can see, it should be a loss. As far as the balance of the
> “Income:Investments:PnL” account goes, that loss is accounted for by your
> second “Conversion" entry, but it leaves me with that “profit” in
> “Income:Exchange” which is a profit I didn’t actually receive.
>
> To explain what I mean, forgetting the share dealing parts of the
> transactions for a moment and just focussing on the FX aspect:
> If I buy 100 GBP worth of USD at a rate of 1.2339 I will receive 123.39 USD.
> If I then sell those USD at a rate of 1.3182 I will receive 93.60 GBP.
> I will have made a loss of 6.40 GBP.
>
> Looking at the FX aspect alone I’m sure there’s a clean way to resolve it,
> but I haven’t found it yet – I’ll have to do some more reading.
>
>
> > On 2 May 2021, at 12:02, [email protected] <[email protected]> wrote:
> >
> > Here's an example. I've removed the commissions for simplicity (they can be
> > added back with some thought, of course). These can all be merged into two
> > transactions, but splitting them up provides clarity on what is happening.
> > You end up with 40 USD in exchange rate gain, which makes sense ((482 GBP *
> > 1.3xxx USD/GBP) - (482 GBP * 1.2xxx USD/GBP) == 40.6886)
> >
> > plugin "beancount.plugins.auto_accounts"
> >
> > 2020-03-31 * "Buy 11 shares of Square"
> > Assets:GB:Freetrade:GIA:Cash -482.60 GBP @ 1.23390 USD
> > Assets:GB:Freetrade:GIA:SQ 11 S_SQ {54.13456 USD}
> > Equity:Rounding -0.00002 USD
> >
> > 2020-11-16 * "Sell 11 shares of Square"
> > Assets:GB:Freetrade:GIA:Cash 1933.91 USD
> > Assets:GB:Freetrade:GIA:SQ -11 S_SQ {54.13456 USD} @ 175.81000 USD
> > Income:Investments:PnL -1338.43 USD
> >
> > 2020-11-16 * "Conversion"
> > Assets:GB:Freetrade:GIA:Cash 1467.08 GBP @ 1.3182 USD
> > Assets:GB:Freetrade:GIA:Cash
> >
> > 2020-11-16 * "Conversion"
> > Income:Investments:PnL -984.48 GBP @ 1.3182 USD
> > Income:Investments:PnL
> >
> > 2020-11-16 * "Book exchange rate loss/gain"
> > ; (482 GBP * 1.3xxx USD/GBP) - (482 GBP * 1.2xxx USD/GBP) == 40.6886
> > Income:Investments:PnL 40.68846 USD
> > Income:Exchange
> >
> > beancount> balances
> > account sum_position
> > ---------------------------- --------------
> > Assets:GB:Freetrade:GIA:Cash 984.48 GBP, 0.00514 USD
> > Assets:GB:Freetrade:GIA:SQ
> > Equity:Rounding -0.00002 USD
> > Income:Exchange -40.68846 USD
> > Income:Investments:PnL -0.00000 USD, -984.48 GBP
> >
> >
> >
> > On Sunday, May 2, 2021 at 3:37:29 AM UTC-7 [email protected] wrote:
> > Interesting. I'll have to have a play with that idea and see what I can
> > come up with that makes sense.
> >
> > From my own accounting point of view the main requirements are:
> > 1. My profit/loss must be in GBP, as that's the currency of the account and
> > the currency I pay tax in.
> > 2. The commodity price should be denominated in its native currency (USD)
> > so that I can fetch prices and see my unrealized gains/losses (converted
> > back to GBP at current rates if I so desire) over time.
> >
> > Regarding your point (a): My account is in GBP and I never see the USD as
> > they are converted by my broker as part of the purchase/sale transaction
> > (at the time of the purchase, their accounting reports didn't even contain
> > the USD price) – but obviously, it's a USD-denominated commodity and it
> > doesn't make sense to try and denominate it in GBP in my ledger.
> >
> > Accounting for the sale as two transactions is a very interesting idea. I'm
> > struggling to mentally imagine how it would look (subject to my constraint
> > 1 above), though maybe it will become clear if I play around with it a bit.
> > Maybe I use an equity account for the temporary (imaginary?) USD holding?
> > Where does the FX loss (or profit) get accounted for? At some point it
> > needs to be offset against my P/L from selling the shares so I end up with
> > the correct overall profit/loss in GBP.
> > Do you think you could share an example of how you envisage booking this as
> > two separate transactions?
> >
> > Thanks!
> >
> >
> >
> >> On 2 May 2021, at 02:15, [email protected] <http://gmail.com/>
> >> <[email protected] <applewebdata://6FC07B9B-4F75-4957-ABE8-D056A4FA8FFD>>
> >> wrote:
> >>
> >
> >> Setting aside beancount for a second,
> >> a) what cost currency was the commodity held in? I.e., what currency was
> >> it purchased and sold against?
> >> b) it seems like a good way to think about this sale is two transactions:
> >> a sale of S_SQ, and a subsequent currency conversion. Do you think that's
> >> a good model? If so, I'd recommend starting by splitting it into those two
> >> transactions in your ledger, which should lead to clarity.
> >>
> >> On Saturday, May 1, 2021 at 1:59:37 PM UTC-7 [email protected]
> >> <http://caesarschinas.com/> wrote:
> >> I think I now understand what's going on here.
> >>
> >> It's actually simple: because the commodity is priced in USD, Beancount is
> >> naturally calculating my profit in USD.
> >> The result is 1338.43 USD – which, at the current exchange rate on the
> >> sale date, is 1015.35 GBP.
> >>
> >> But because I actually made the transactions in GBP, and the exchange rate
> >> has changed in the meantime, my actual profit is different (977.88 GBP).
> >>
> >> I'm not sure what the cleanest way is to resolve this. At present I can
> >> think of two options:
> >>
> >> 1. Use a 'false' FX rate for the profit/loss leg of the transaction, such
> >> as by using Beancount's @@ syntax.
> >> Example:
> >> Income:Investments:PnL -977.88 GBP @@ 1338.43 USD
> >> At first glance this seems quite elegant, but one disadvantage is that it
> >> will result in incorrect entries in the prices database for GBP/USD.
> >>
> >> 2. Add another leg for FX gains/losses (I'm not sure if Expenses is the
> >> right category)
> >> Example:
> >> Income:Investments:PnL -977.88 GBP @ 1.31820 USD
> >> Expenses:Financial:FXGainLoss -37.46 GBP @ 1.31820 USD
> >> The problem with this is that it looks like I made a profit on the FX
> >> difference, when I actually made a loss. I'm not sure how to resolve that.
> >>
> >> Does anyone have any better ideas?
> >>
> >>
> >> On Sat, 1 May 2021 at 20:54, Caesar Schinas <[email protected] <>>
> >> wrote:
> >> Apologies, I made a minor error in my last message – my arithmetic doesn't
> >> add up because I omitted to account for the FX fee of 6.60 GBP.
> >> The point remains: the much larger 'error' of 49.38 GBP is unaccounted for.
> >>
> >> On Saturday, 1 May 2021 at 20:46:45 UTC+1 Caesar Schinas wrote:
> >> But that's the thing: my income wasn't 1015.34 GBP, it was 977.88 GBP.
> >> That is the difference between the amount of 482.60 GBP that was debited
> >> from my account when I bought the shares, and the amount of 1467.08 GBP
> >> that was credited to my account when I sold the shares.
> >>
> >> So something else is amiss. But I can't work out what. (Unless it's
> >> totally incorrect exchange rates from my broker. But their web interface
> >> shows the same figures as the CSV from which I extracted the above data,
> >> and I'm loath to 'massage' the rates just to make the numbers fit, without
> >> actually understanding what's wrong.)
> >>
> >>
> >> On Saturday, 1 May 2021 at 20:18:53 UTC+1 redst...@ <>gmail.com
> >> <http://gmail.com/> wrote:
> >> Sale 11 175.81 1,933.91
> >> Cost 11 54.135 595.49
> >> 1,338.43
> >>
> >> Proceeds 1467.08 1.3182 1,933.90
> >> PnL (1,015.34) 1.3182 (1,338.43)
> >> 595.48
> >>
> >> So you should have -1015.34 GBP as your Income, not -977.88
> >>
> >> Of course, you would need an additional posting to absorb rounding errors.
> >>
> >> On Wednesday, April 28, 2021 at 5:14:40 PM UTC-7 cae...@
> >> <>caesarschinas.com <http://caesarschinas.com/> wrote:
> >> I've been using beancount for a while for my everyday transactions, but am
> >> only recently getting around to trying to import my trading activity to my
> >> ledger as it seems much more complex.
> >>
> >> I'm having trouble with accounting for profit/loss on shares which are
> >> priced in a currency different to the main currency of my trading account.
> >>
> >> My trading account is in GBP, but I often buy shares priced in USD. My
> >> broker handles the conversion, and charges me an FX fee as a percentage of
> >> the value of the trade.
> >>
> >> Here is an example:
> >>
> >> 2020-03-31 * "Buy 11 shares of Square"
> >> Assets:GB:Freetrade:GIA:Cash -482.60 GBP @ 1.23390 USD
> >> Assets:GB:Freetrade:GIA:SQ 11 S_SQ {54.13456 USD}
> >>
> >> ; ...
> >>
> >> 2020-11-16 * "Sell 11 shares of Square"
> >> Assets:GB:Freetrade:GIA:Cash 1467.08 GBP @ 1.31820 USD
> >> Assets:GB:Freetrade:GIA:SQ -11 S_SQ {54.13456 USD} @ 175.81000
> >> USD
> >> Assets:GB:Freetrade:GIA:Cash -6.60 GBP
> >> Expenses:Financial:Fees 6.60 GBP
> >> Income:Investments:PnL -977.88 GBP @ 1.31820 USD
> >>
> >> All the figures are from my broker's reports, except for the profit
> >> calculation.
> >> For the profit I have simply subtracted the GBP purchase price from the
> >> GBP sale price, as this is the actual amount of profit I made (the actual
> >> net change in my account balance).
> >>
> >> However, the second transaction does not balance:
> >> Transaction does not balance: (49.3832800 USD)
> >>
> >> I am struggling to understand where the extra 49.3832800 USD came from
> >> (or went?), or how I can balance this transaction.
> >>
> >> I'm quite new to this. Can anyone give me any tips?
> >>
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