Bo, For this discussion I’m using the term trading gains to refer to both gains and losses and booking both (as credits and debits respectively) into an income account.
As you say, the income occurs when you go the other way. Leaving off trading accounts for a moment, if you transfer $100 to JPY @$.67/¥100 there’s no income. When you buy lunch later in the week for ¥1500 and the exchange rate that day is $.70/¥100 then you have a USD expense of $10.50 (1500 * .7) but a USD cost of only $10.05 (.67 * 1500) so you have a trading gain of $.45. You need to book that gain as income in order for your book to stay in balance in USD. Now you claim that some of those trading gains are taxable and some aren’t. If that’s true then you need two accounts to keep them separate so you know how much taxable trading income to report on your taxes. If it’s really that simple then you can use a single set of trading accounts to track your unreported realized gains. But what about JPY income? That has to be booked to a USD-denominated income account at the day’s exchange rate but when you buy lunch with that money and book the expense on a different day and exchange rate you have the appearance of a trading gain that needs to be balanced, but no trade occurred. At that point I’m in over my head and have to tell you to get professional advice on both how to do the accounting and how to use trading accounts to keep track of the trading gains. I can easily imagine the need for separate sets of trading accounts to ensure that everything stays in balance in both currencies, but remember that I have neither experience nor expertise in this. Regards, John Ralls > On Feb 14, 2025, at 19:53, Bo Buckley <topherbuck...@gmail.com> wrote: > > Dear John, > > Thank you for your reply. > >> I don’t understand what you mean by “zero this out for today”. > > Maybe I misunderstood what you meant when you said, > >> If the net gains aren’t taxable then you can book them to a separate >> non-taxable income account. > > Say I'm doing my US reporting, and this transfer from USD to JPY wouldn't be > taxable (as far as I know, only the opposite would be). Then to "book them to > a separate non-taxable income account" would involve what exactly? Say I had > an Income:NonTaxable account, what would the transaction look like? I > apparently can't offset a debit to Income:NonTaxable with either Trading > account, so not sure what this would look like. > > Thanks again. > > On Fri, Feb 14, 2025 at 10:38 AM John Ralls <jra...@ceridwen.us > <mailto:jra...@ceridwen.us>> wrote: >> Bo, >> >> I don’t understand what you mean by “zero this out for today”. >> >> The Totals column on the Accounts page presents the ending balance for each >> account (even if that’s in the future), converted to the book currency using >> the most recent exchange rate available from the account’s commodity to the >> book currency. >> >> The manually created trading splits will look just like the automatically >> created ones. The difference will be that you have to create them yourself, >> selecting the taxable or non-taxable balance. Remember that the trading >> accounts are outside of the accounting equation and exist to help you keep >> track of your conversions into and out of commodities so that you book the >> gains and losses and keep your overall book in balance. The goal of >> splitting the trading accounts would be to make it clearer which trading >> gains income account—taxable or not-taxable—needs to be adjusted to balance >> your book. Mind that I’m not an accountant and even if I was I wouldn’t be >> *your* accountant. I also have no experience as an ex-pat paying US taxes on >> income earned in somebody else’s currency. >> >> One other thing to be aware of: The register displays currency differently >> depending on whether trading accounts are enabled: When they’re enabled the >> debit and credit numbers represent the amount in the split’s account’s >> commodity; when trading accounts are off the credit and debit numbers are >> the values in the current register’s account’s currency. In other words with >> trading accounts off all of the amounts in your JapaneseChecking register >> will be JPY and in Banking Service Fees they’ll all be USD. >> >> Regards, >> John Ralls >> >> >>> On Feb 13, 2025, at 16:39, Bo Buckley <topherbuck...@gmail.com >>> <mailto:topherbuck...@gmail.com>> wrote: >>> >>> Thank you for your reply John, >>> >>> >If the net gains aren’t taxable then you can book them to a separate >>> >non-taxable income account. >>> >>> Even if I zero this out for today as an example, won't the Trading account >>> balance continue to fluctuate even after doing so as new price entries come >>> on day to day? I'm trying to understand how to finalize the transaction in >>> the same way I would wrap up a GOOG stock sale (i.e. I would never expect >>> to keep tracking unrealized gains/losses on the idea that the USD received >>> from the stock sale is waiting to be "sold" to return back to GOOG. >>> >>> >GnuCash also can’t automatically handle multiple trading accounts per >>> >commodity. If you need that you’ll have to turn off trading accounts in >>> >File>Properties and manage the trading accounts and splits manually. >>> >>> Assuming I turn it off, do you have an example transaction to help me >>> understand what you're proposing here? I'm not sure I understand what this >>> would solve. >>> >>> Thanks in advance. >>> >>> >>> >>> On Fri, Feb 14, 2025, 02:37 John Ralls <jra...@ceridwen.us >>> <mailto:jra...@ceridwen.us>> wrote: >>>> >>>> >>>> > On Feb 13, 2025, at 01:19, Bo Buckley <topherbuck...@gmail.com >>>> > <mailto:topherbuck...@gmail.com>> wrote: >>>> > >>>> > In the foreign currency docs: >>>> > https://gnucash.org/docs/v5/C/gnucash-guide/currency_trading_accts.html >>>> > >>>> > The Trading and CURRENCY placeholder accounts now indicate a modest >>>> >> realized loss of 0.82 USD on the currency transactions. >>>> > >>>> > >>>> > it appears to explain that the Trading top-most account balance >>>> > represents >>>> > a loss if positive or a gain if negative. I only have a single >>>> > transaction >>>> > so far that involves converting USD to JPY for a transfer. See attached >>>> > for >>>> > the transaction. The Trading account already shows a balance of 247.38 >>>> > USD. >>>> > How does this make sense? I didn't lose money on the transfer (other than >>>> > the fee). It appears this balance is calculated based on the most recent >>>> > Price Database entry for the currency (i.e. JPY at 0.0066 for >>>> > 02/09/2025). : >>>> > 4,964.32 - (714,688* 0.0066) = 247.38. >>>> > >>>> > It seems to be interpreting a currency exchange from 1/9/2024 as a loss >>>> > even though at the time of the trade it was not a loss. How am I to >>>> > interpret this and what is this Trading Balance used for elsewhere? I >>>> > don't >>>> > want it unintentionally affecting some other report calculations. >>>> > >>>> > For the sake of clarification, lets compare this behavior to stock >>>> > trading. >>>> > USD and JPY are two commodities, just like USD and GOOG. For my example >>>> > transfer from USD to JPY, the Trading Account balance loss seems to be >>>> > similar to an unrealized loss if I interpret the transfer transaction as >>>> > buying JPY from USD with the intent to someday convert back to USD. This >>>> > is >>>> > similar to buying GOOG from USD and if GOOG dropped in values since >>>> > buying. >>>> > But why is it not interpreted the opposite way, i.e. I sold USD to get >>>> > back >>>> > JPY (or I sold GOOG to get back JPY for the stock analogy)? I want to >>>> > make >>>> > sure GNUcash is not unknowingly treating the correct transactions as >>>> > taxable events and not the opposite. I.e. for Japanese tax reporting the >>>> > transfer would represent a taxable event as I "sold USD". The opposite >>>> > would be true for US tax reporting no? I want to make sure I understand >>>> > the >>>> > implications of this balance. >>>> >>>> Bo, >>>> >>>> The Accounts page Total column does use the most recent price database >>>> entry to value each commodity that isn’t the book currency and that will >>>> make the trading accounts reflect an unrealized gain or loss. >>>> >>>> US GAAP and IAS require all foreign currency transactions to be valued at >>>> the time of the transaction in the book currency, and doing so inevitably >>>> creates trading gains an losses that must be accounted for to keep the >>>> books in balance. If the net gains aren’t taxable then you can book them >>>> to a separate non-taxable income account. Keep in mind that GnuCash has no >>>> way of helping you catch mistakes where you book a capital gain or loss to >>>> the wrong income ro expense account: It can only verify that the >>>> accounting equation balances for the whole book. GnuCash also can’t >>>> automatically handle multiple trading accounts per commodity. If you need >>>> that you’ll have to turn off trading accounts in File>Properties and >>>> manage the trading accounts and splits manually. >>>> >>>> Regards, >>>> John Ralls _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
