James, If I’m not mistaken, I recall a discussion in the last 6 months or so that average/weighted is ‘broken’. That it reports the correct figures may be a transient phenomenon as you fear. (I’ll admit, I don’t have the thread handy and it could be that ’Nearest in time’ is the one that is broken - it might be on the devel list, so look there if you don’t find it in the user archives.)
’Nearest in time’ should be the source you want because the report will look for the exchange rate closest to the date of the actual transaction it is including in the calculations. Since you have actual transactions using a particular exchange rate, it should pull those figures exactly. That should be the default. (It is for me and I can’t seem to find a preference setting for it, short of saving a report configuration.) ‘Most Recent’ is definitely not what you want and would use the most current exchange rate. (perhaps useful for a Balance Sheet, not so much for a P&L) I personally haven’t seen any issues with ’Nearest in time’. Regards, Adrien > On Mar 26, 2019, at 11:36 AM, James Walker <[email protected]> wrote: > > Hello fellow GnuCash users, > > Per the subject, I'm somewhat confused by the impact of the report "Price > Source" when recording Bills received in a foreign currency. > > I'm using GnuCash for a UK business (all accounts in GBP) for very simple > affairs. > > I use the services of a US business which invoices everything in USD. > > To account for this GnuCash, I've done the following: > > > * Enabled Trading Accounts > * Created an A/Payable account in USD ("Liabilities:Current > Liabilities:Trade Creditors USD") > * Created a USD expenses account for the company ("Expenses:US Company > USD") > * Created a Vendor for the company and set its payment currency to USD > > When I receive an invoice from the company, I do the following: > > > * Create a Bill for the invoice, with the USD amount shown on the invoice, > for the Vendor > * Post the Bill to the Trade Creditors USD (Liability) / US Company USD > (Expense) accounts > > When I pay the invoice, I do the following: > > > * Credit Bank (GBP) and debit Trade Creditors USD (USD) > * GnuCash prompts for the exchange rate; I input the GBP amount which was > taken from the bank account for the payment > > An example of three invoices received: > > > 1. Invoice 1: $14.40 > 2. Invoice 2: $14.40 > 3. Invoice 3: $14.40 > > * Balance of US Company USD (Expense): $43.20 > > When credited from Bank (GBP), the amounts respectively are: > > > 1. £10.60 > 2. £10.87 > 3. £11.02 > > * Total expenses paid from bank in GBP: £32.49 - this is the figure I > expect to see on the P&L > > These figures match up with what is shown in the trading accounts: GBP > £32.49, USD -$43.20. > > Generating P&L > > When I now go and generate a report (e.g. Profit & Loss), the default options > seem to be showing the expenses at the most recent exchange rate. > > I see expenditure of e.g. £32.61, with a £0.12 currency trade. This means the > P&L is wrong and the balance sheet won't balance, because the expenditure > from Bank was actually only £32.49. > > It seems the multi-currency features in GnuCash are geared towards actual > currency trading/asset tracking etc., not my simple "I've got a USD invoice" > scenario. > > To me, the £32.61 figure seems blatantly incorrect; I haven't spent that much > money. My understanding is the P&L needs to show £32.49, which is how much > was actually taken from the Bank and debited to "Trading:Currency:GBP" from > "Trading:Currency:USD". > > It seems GnuCash is forcing automatic currency conversions onto me when I > don't need them, and breaking things in the process, but my understanding may > be wrong, which is why I'm asking this. > > By changing "Price Source" in the report options to either "Average Cost" or > "Weighted Average," I can get the P&L to show £32.49 as expected. > > However, I don't understand why this works, or what these two price sources > are actually calculating. I've read the documentation and don't fully > understand the language so could really benefit from some clarification. > > Although it is currently working, I need to understand why it is working and > whether it will continue working, in order to have peace-of-mind that the P&L > will continue to show the expected figure when using these options in the > future, after adding further transactions. > > The documentation says this of "Average Cost": > > The amount-weighted net average of all splits exchanging the > commodity for another regardless of account. Gain/loss splits are included in > the calculation. > > While this does produce the value I expect to see on the report (in my > trivial experiments), I'm concerned about the "average" labelling as I don't > understand what is actually being averaged or how it's ending up producing > the correct value, when the defaults don't. The same is true of "Weighted > Average" - again, it gives me the figure I want to see, but I don't know why. > What is it averaging? What is it weighting with respect to what? How will the > output of these two options differ, if at all, as I add more transactions in > this manner? > > My questions > > > 1. Please provide a simple explanation of the "Average Cost" / "Weighted > Average" price sources. Which is most appropriate for my scenario? Why do > they give me the correct value, and will they continue to do so down the > line? Is there a risk future transactions will throw off the "average" and > create an incorrect P&L in the future, which I won't necessarily immediately > spot? > 2. Is there anything wrong with my process here? > > The confusing thing for me is that everything is displayed as expected with > the figures in the chart of accounts, but I'm getting thrown by the default > report options and the labelling of the price sources. I believe this is just > GnuCash's default multi-currency/trading handling conflicting with my > requirements but need to make sure. > > I just want to confirm if it is safe for me to record USD bills in this > manner when my books are in GBP, and then how I should go about generating a > P&L which shows the total expenses in GBP as actually paid out of the bank. > > Kind regards, > James Walker _______________________________________________ gnucash-user mailing list [email protected] To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
