Sorry, small correction
Expenses and Incomes are tracked at the historical exchange rate On Sun, Mar 10, 2019 at 4:46 PM Chary Chary <[email protected]> wrote: > Richard, > > thanks for your inputs. > > I also was thinking about this. Even more, I have now written a document > (Multiple > currency accounting example with trading account > <https://docs.google.com/document/d/1z57E8KZ9hIF71s39dDKaE5ow1N7BdJ-eX8y2BFjR9kc/edit?usp=sharing>), > which > describes proposed calculation method. As an appendix, this document > contains google sheet > <https://docs.google.com/spreadsheets/d/1-wdXsPcBLjbYO9qLi924X2JWPw8plkWeGbSdjttcsZY/edit?usp=sharing>, > where you can see how the method is implemented and play around with it. > > The approach is quite simple > > > 1. > > Expenses are tracked at the historical exchange rate (e.i. at the > exchange rate, available during transaction). When exchange rate changes, > Expenses and Income do not get re-calculated. > > This is believed to be inline with conventional wisdom , that if you have > consumed pizza for 10 USD, there is no reason to re-calculate how much this > pizza is worth now in EUR, when USD/EUR exchange rate changed. It only > makes sense to know how much that pizza was worth in EUR, when you consumed > it. > > > 1. > > Assets and Liabilities on the other side are recalculated with every > event of exchange rate change. > > This is also inline with conventional wisdom. If you own 1000 of Currency > / stock XYZ and all of a sudden this currency became more expensive (just > think of Bitcoin), this means you actually got reacher and you want to see > it. > > > 1. > > The exchange rate changes are taken care in the following way: > > A special Commodity Revaluation transaction is logged. Following the > principle of double-entry accounting > > - > > one shoulder of transaction is logged to corresponding Asset and / or > Liability accounts to adjust these accounts to new exchange rate. > - > > another shoulder is logged to special Gain due to commodity price > change (trading account, using Peter Selinger’s terminology). > > > The example calculation can be seen in Appendix A. Google sheet - based > calculation example > <https://docs.google.com/document/d/1z57E8KZ9hIF71s39dDKaE5ow1N7BdJ-eX8y2BFjR9kc/edit#heading=h.ibvb27d8cznn> > > So, to answer your particular question: > > > > > > > > *For example, say you gain 1000 USD in income during that period. > What's the right way to understand that change in terms of EUR? Should > we value the 1000 in EUR on the date that you took it in, and use > that number in a running total of EUR gained and lost throughout the > period? Or should we continue to think of it as 1000 USD until the very end > of the period in question, and then convert the running total to EUR > using the exchange rate at the end of the period? * > > In income account, this 1000 USD have to be tracked with historical > exchange rate > If however these 1000 USD were put as asset in bank account, then they now > have to be re-calculated to follow changes in USD/EUR exchange rate AND > gain due to revaluation has to be logged > > Please check my document and see whether it makes sense. > > I still need to check your ledger examples. I must say it is quite > possible, that ledger actually does something like that. > > Regards. > > Chary > > > On Friday, March 8, 2019 at 9:59:26 AM UTC+1, Richard Lawrence wrote: >> >> Hi Chary and all, >> >> Chary Chary <[email protected]> writes: >> >> > yes, thanks for your patience. Sorry if I did not express myself >> correctly >> > initially. You got me right with small corrections. I want: >> > >> > - a single report >> > >> > - that shows the change in your assets and Liabilities between two >> points >> > in time >> > >> > - grouped into Accounts (line with the balance) command >> > >> > - which includes unrealized gains and losses >> > >> > - where the total reflects the overall change >> >> OK, after thinking through this a bunch more, and getting myself fairly >> confused, I believe I have convinced myself that what you're looking for >> doesn't make sense yet. >> >> Here's the problem. You want a report that lumps together two kinds of >> changes during a specific time period: actual transactions, recorded in >> a specific currency (say, USD) and potential gains/losses due to changes >> of prices in commodities during that period, including alternate >> currencies (say, EUR). But these two kinds of changes are orthogonal to >> one another and it's not yet clear how they should interact. >> >> For example, say you gain 1000 USD in income during that period. What's >> the right way to understand that change in terms of EUR? Should we >> value the 1000 in EUR on the date that you took it in, and use that >> number in a running total of EUR gained and lost throughout the period? >> Or should we continue to think of it as 1000 USD until the very end of >> the period in question, and then convert the running total to EUR using >> the exchange rate at the end of the period? >> >> It seems that you can *either* ask the question: >> >> (1) How did my *actual* assets change during a specific *period* in time? >> >> or: >> >> (2) Given my actual assets at a specific *point* in time, what potential >> gains/losses would I incur by converting those assets to another >> commodity (say, another currency) *at that point in time*? >> >> but I don't think it makes sense to ask: >> >> (3) How did my assets, including *unrealized* (i.e., potential) >> gains/losses due to currency conversions, change during a specific >> period? >> >> In other words, I don't think it makes sense to talk about how the >> *unrealized* value of assets *changed* over a period in time. Or at >> least, it doesn't make sense until you make some decisions about how to >> define the non-actual value of assets at different points in time. >> >> You can answer question (1) in a variety of ways. The easiest one is >> just: >> >> ledger bal Assets -b begin_date -e end_date >> >> (Note: begin_date must be some time *after* your opening balances, if >> you only want to see changes, not the full total for the account on the >> day before end_date.) >> >> If you want a breakdown of where those changes come from, you might find >> this version more helpful: >> >> ledger reg Assets -b begin_date -e end_date --related --subtotal >> >> On the other hand, using -b/-e with -X and --unrealized doesn't seem to >> make sense, as I explained above (although ledger happily accepts them >> both, probably because it uses one of the specific interpretations I >> mentioned to understand your non-actual assets across a given period). >> To answer question (2), you need something like: >> >> ledger bal Assets --unrealized -X some_commodity >> >> perhaps adding --now=... or -e end_date if you want to know your >> unrealized gains/losses in some_commodity at a point in time other than >> right now. >> >> Does this make sense? >> >> -- >> Best, >> Richard >> > -- > > --- > You received this message because you are subscribed to the Google Groups > "Ledger" group. > To unsubscribe from this group and stop receiving emails from it, send an > email to [email protected]. > For more options, visit https://groups.google.com/d/optout. > -- --- You received this message because you are subscribed to the Google Groups "Ledger" group. 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