Currency trading accounts

simonmichael edited this page Jun 10, 2011 · 1 revision

Currency trading accounts allows one to keep track of currency gains and losses at any instant of time.
This means that for any given period, the balance sheet will change by the profit earnt during that period.
For a fuller description of currency trading accounts and their motivation see here.

We’ll start by banking 10,000 Australian dollars.


2009/01/01 First sale Income:Sales -10000.00 AUD Assets:Bank 10000.00 AUD

Now on the first of February we’ll receive a bill 1,000 euros for Marketing.
The key point is that we route all of our currency trades through the currency trading accounts.

P 2009/02/01 EUR 2.00 AUD 2009/02/01 Marketing (1 EUR = 2.00 AUD) Expenses:Marketing 2000.00 AUD Currency:AUD -2000.00 AUD Liabilities:Accounts Payable:EUR -1000.00 EUR Currency:EUR 1000.00 EUR

Now on the 15th of February the Euro will only be worth $1.90.

P 2009/02/15 EUR 1.90 AUD

Now let’s look at our balance sheet with the euro liability transformed into Australian dollars.
Note that “-X” is only supported in ledger 3 or later.

$ ledger -X AUD -f invoice.dat bal assets liabilities 10,000.00 AUD Assets:Bank -1,900.00 AUD Liabilities:Accounts Payable:EUR -------------------- 8,100.00 AUD

and the income statement

$ ledger -X AUD -f invoice.dat bal income expenses currency -100.00 AUD Currency -2,000.00 AUD AUD 1,900.00 AUD EUR 2,000.00 AUD Expenses:Marketing -10,000.00 AUD Income:Sales -------------------- -8,100.00 AUD

The key point to note is that our “Currency” account has a profit of $100 in it.
Note that this currency gain is currently an unrealized gain.

On the first of March we’ll pay this invoice, except the euro will now be worth $1.95.
Again note that route all of our currency conversions through our trading account.


P 2009/03/01 EUR 1.95 AUD 2009/03/01 Pay Marketing Invoice (1 EUR = 1.95 AUD) Assets:Bank -1950.00 AUD Currency:AUD 1950.00 AUD Liabilities:Accounts Payable:EUR 1000.00 EUR Currency:EUR -1000.00 EUR

Here is the balance sheet


$ ledger -X AUD -f invoice.dat bal assets liabilities 8,050.00 AUD Assets:Bank

and the income statement

$ ledger -X AUD -f invoice.dat bal income expenses currency -50.00 AUD Currency:AUD 2,000.00 AUD Expenses:Marketing -10,000.00 AUD Income:Sales -------------------- -8,050.00 AUD

As you can see our currency gain has fallen from $100 to $50 as the exchange rate has moved again.
However at all times our balance sheet matched our income statement.