Trial balance failed!

Discussion:

Derek Atkins

2008-01-21 14:46:41 UTC

Hi,

First, please remember to CC gnucash-user on all your replies using
your mailer's Reply-To-List or Reply-All feature..

Hi Derek,
I still have a problem with my gnucash trial balance. Well, I have had several foreign exchange transactions so Exactly what amount should I fill in the splits.
I have tried copying my gnu file then from the price editor I have changed all the different exchange rates into one rate but still the trial balance is off. The Dr. side exceeds the Cr. side. There is an amount under "unrealized gains" but it's still not enough to off set the imbalance.
I really do not understand why the "unrealised gains" yet the exchange rate is the same!

Exactly what amount you should fill in the splits is a factor of the
exchange rate at the time of the aquisition and the rate at the time
of "sale".

The trial balance probably doesn't care about the entries in the price
editor, I don't think. Honestly I've never even looked at the T-B
report. I just use the real Balance Sheet.

-derek

Hi,

My trial balance still in imbalance. I have traced the imbalance on a
transaction involving Foreign currencies. Any way to fix this?

Add proper Gain/Loss splits to the sale of the foreign currency.
-derek

Oh, here is another thought: I deal with more than one currency. Could
USD Bank account: $2000
CAD Bank account: $2000
2) I transfer $1000 USD to Canada at a rate of $1 US = $1.30 CAD.
USD Bank account: $1000
CAD Bank account: $3300
3) The Canadian dollar appreciates to $1 US = $1.10 CAD. If I calculate
my
total assets in USD, some money will have vanished. If I calculate my
total assets in CAD, some money will have appeared out of nowhere.
If I have income and expenses in more than one currency, I guess
currency fluctuations could ruin the trial balance.
Do you think this might be the problem?

It might, but based on my experiments I don't think it is.
1. Create new file: minimal structure (just accept defaults).
2. Credit Assets:Cash:Cash in Wallet with GBP1000 from Equity:Opening
Balances
3. Create account Assets:Cash:Cash in Wallet:Euro
4. Credit the EUR account with EUR200 from the GBP account, accepting
the
default exchange rate of GBP1=EUR1.515152; this showed as GBP132 there
5. Trial Balance shows (omitting blank entries)
Cash in Wallet £868
Euros £132
Opening Balances £1000
£1000 £1000
So far so good.
6. In Price Editor, update the rate to EUR1=GBP0.7
Cash in Wallet £868
Euros £140
Opening Balances £1000
£1008 £1008
and there's also a line "Unrealized Gains" with nothing against it.
Note that the Credit column (on the right) doesn't add up.
8. In Price Editor, update the rate to EUR1=GBP0.5
Cash in Wallet £868
Euro £100
Opening Balance £1000
Unrealized Gains £32
£1000 £1000
Now the columns add up.
They still balance though, whether the exchange rate goes up or down. In
the "up" situation, I think it's just omitted £8 in the "Credit" column
for "Unrealized Gains".
Do you have any Stock accounts in which you have done a negative Stock
Split? This was the problem I reported a couple of days ago. I have now
reproduced it in a two-transaction scenario (buy some stock, do a
negative split; result: trial balance failure).
Clearly the Trial Balance report code has bugs. I'm not in a position to
find them, much less fix them.
_______________________________________________
gnucash-user mailing list
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.

--
http://www.nabble.com/Trial-balance-failed%21-tf3953516.html#a13909795
Sent from the GnuCash - User mailing list archive at Nabble.com.
_______________________________________________
gnucash-user mailing list
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.

--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board (SIPB)
URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
_______________________________________________
gnucash-user mailing list
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.

http://www.nabble.com/Trial-balance-failed%21-tp11217243p13972804.html

--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board (SIPB)
URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
***@MIT.EDU PGP key available
_______________________________________________
gnucash-user mailing list
gnucash-***@gnucash.org
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-L

Miano Murage

2008-01-22 07:13:54 UTC

Permalink

Hi,
Actually, the trial balance is important to check whether the double
entry is done correctly. The accuracy of all other reports including the
Balance sheet will depend on the accuracy of the double entry system and
hence the trial balance.

Well, the rates in the price editor in deed affect the trial balance. In
the reports window under Options - Commodities - Price source, if you
choose the option 'Nearest in time' the exchange rate to be used in the
report is form the Price Editor.

What i don't really understand is how gnucash computes "Unrealised
gains".
For instance:
My default currency is KES (Kenyan Shilling). I also maintain a US
Dollar Bank Account (USD). The exchange rate is set at KES 66 per USD in
the Price Editor. Thus far, the trial balance is Ok.
When I credit the Dollar Account with the bank charges of $10 , (the
BANK CHARGES account is a KES expense account) at a rate of 65 the trial
balance goes off by an amount of KES 640(Dr. side exceeds the CR side).
There is however an amount indicated as Unrealized gains of KES 650
which obviously will not offset the imbalance!

Might it be possible that gnucash can track the gains/losses in changes
in currency exchange rate automatically like other accounting softwares?
If yes, how do you activate this?

Post by Derek Atkins
Hi,
First, please remember to CC gnucash-user on all your replies using
your mailer's Reply-To-List or Reply-All feature..

Exactly what amount you should fill in the splits is a factor of the
exchange rate at the time of the aquisition and the rate at the time
of "sale".
The trial balance probably doesn't care about the entries in the price
editor, I don't think. Honestly I've never even looked at the T-B
report. I just use the real Balance Sheet.
-derek

Hi,

My trial balance still in imbalance. I have traced the imbalance on a
transaction involving Foreign currencies. Any way to fix this?

Add proper Gain/Loss splits to the sale of the foreign currency.
-derek

http://www.nabble.com/Trial-balance-failed%21-tp11217243p13972804.html

_______________________________________________
gnucash-user mailing list
gnucash-***@gnucash.org
https://lists.gnucash.org/mailman/listinfo/gnucash-user
-----
Please remember to CC this list on all your replies.
You can d

Derek Atkins

2008-01-22 13:39:50 UTC

Permalink

Hi,

Post by Miano Murage
Hi,
Actually, the trial balance is important to check whether the double
entry is done correctly. The accuracy of all other reports including the
Balance sheet will depend on the accuracy of the double entry system and
hence the trial balance.

I believe you, but I've always just run the full balance sheet.
You can see from there if the double entry is broken.

Post by Miano Murage
Well, the rates in the price editor in deed affect the trial balance. In
the reports window under Options - Commodities - Price source, if you
choose the option 'Nearest in time' the exchange rate to be used in the
report is form the Price Editor.

ok.

Post by Miano Murage
What i don't really understand is how gnucash computes "Unrealised
gains".

I dont know. The trial-balance was donated. You could look in
'trial-balance.scm' and find out?

Post by Miano Murage
My default currency is KES (Kenyan Shilling). I also maintain a US
Dollar Bank Account (USD). The exchange rate is set at KES 66 per USD in
the Price Editor. Thus far, the trial balance is Ok.
When I credit the Dollar Account with the bank charges of $10 , (the
BANK CHARGES account is a KES expense account) at a rate of 65 the trial
balance goes off by an amount of KES 640(Dr. side exceeds the CR side).
There is however an amount indicated as Unrealized gains of KES 650
which obviously will not offset the imbalance!

Correct, because you need to manually account for the gain/loss of
the transaction. If your expense account was in USD then this wouldn't
be a problem. But because your expense account is in KES then you
need to manually account for the gain/loss of USD<->KES between
when the money was put into the USD account and when it was taken out.
For example, let's assume you put in $100 at 66 KES/$, so your $100
account is worth 6600KES. Now you remove $10 at 65KES. That means you
removed 650KES from your 6600KES, but you removed $10. That means you
have 10KES "extra" in your account, which you need to account for!

Post by Miano Murage
Might it be possible that gnucash can track the gains/losses in changes
in currency exchange rate automatically like other accounting softwares?
If yes, how do you activate this?

It should be turned on automatically IFF you have F::Q support, unless
you turned it off for your commodity or it can't find currency quotes
for you.

Post by Miano Murage

Please remember to CC this list on all your replies.
You can do this by using Reply-To-List or Reply-All.

-derek
--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board (SIPB)
URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
***@MIT.EDU PGP key available
_______________________________________________
gnucash-user mailing list
gnucash-***@gnucash.org
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.

Miano Murage

2008-01-25 08:36:42 UTC

Permalink

Hi,
I found some information on the problem in the address below.

http://www.mscs.dal.ca/%7Eselinger/accounting/gnucash.html

Any comment on the same?

Miano.

Post by Derek Atkins
Hi,

I believe you, but I've always just run the full balance sheet.
You can see from there if the double entry is broken.

ok.

Post by Miano Murage
What i don't really understand is how gnucash computes "Unrealised
gains".

I dont know. The trial-balance was donated. You could look in
'trial-balance.scm' and find out?

It should be turned on automatically IFF you have F::Q support, unless
you turned it off for your commodity or it can't find currency quotes
for you.

Post by Miano Murage

Please remember to CC this list on all your replies.
You can do this by using Reply-To-List or Reply-All.

-derek

Charles Day

2008-01-25 09:51:42 UTC

Permalink

Post by Miano Murage
Hi,
I found some information on the problem in the address below.
http://www.mscs.dal.ca/%7Eselinger/accounting/gnucash.html
Any comment on the same?

This way of doing currency accounting was brought up a few months ago
in this mailing list before I subscribed, so I never got a chance to
comment on it. So at the risk of covering old ground, here goes.

My reading of the author's suggested method is that, while it is
perfectly valid, it essentially asks for separate books to be kept for
each currency. The "Currency" accounts referred to in the writeup seem
to function like Equity accounts in which assets are added or removed
from each currency's set of books.

In my opinion, a buying or selling a currency should be handled the
same as buying or selling a stock, bond, bar of gold, or any other
commodity. If special exchange accounts aren't needed to properly
account for stock trades, then they aren't needed to properly account
for currency trades either. (Perhaps the author would reply that they
*are* needed for stocks, I don't know.)

In any case, it seems to me that in order to avoid breaking the trial
balance, GnuCash needs to force users to properly account for capital
gain/loss entries whenever a trade is done between commodities, be it
stocks, currencies, whatever.

.02

-Charles

Post by Miano Murage
Miano.

Post by Derek Atkins
Hi,

I believe you, but I've always just run the full balance sheet.
You can see from there if the double entry is broken.

ok.

Post by Miano Murage
What i don't really understand is how gnucash computes "Unrealised
gains".

I dont know. The trial-balance was donated. You could look in
'trial-balance.scm' and find out?

It should be turned on automatically IFF you have F::Q support, unless
you turned it off for your commodity or it can't find currency quotes
for you.

Post by Miano Murage

Please remember to CC this list on all your replies.
You can do this by using Reply-To-List or Reply-All.

-derek

_______________________________________________
gnucash-user mailing list
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.

Mike or Penny Novack

2008-01-25 13:43:04 UTC

Permalink

Post by Charles Day
In my opinion, a buying or selling a currency should be handled the
same as buying or selling a stock, bond, bar of gold, or any other
commodity. If special exchange accounts aren't needed to properly
account for stock trades, then they aren't needed to properly account
for currency trades either. (Perhaps the author would reply that they
*are* needed for stocks, I don't know.)
In any case, it seems to me that in order to avoid breaking the trial
balance, GnuCash needs to force users to properly account for capital
gain/loss entries whenever a trade is done between commodities, be it
stocks, currencies, whatever.
.02
-Charles

I think it's not so simple -- and that this is an accounting/legal
question, not a GnuCash question. If you are TRADING in foreign exchange
as if it were a commodity then yes, your solution answers the question.
But it's not so simple where you have a business doing business in
multiple currencies, owing taxes at certain times in various currencies,
etc. The date at which the gain or loss (one currency relative to
another) is to be recorded is not necessarily when the original
transaction took place --- or at least that is far from clear.

Before deciding what GnuCash should do need to see how this is normally
handled in old fashioned pen and ink on paper accounting.

Michael
_______________________________________________
gnucash-user mailing list
gnucash-***@gnucash.org
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.

Charles Day

2008-01-25 23:18:04 UTC

Permalink

Post by Mike or Penny Novack

I agree those issues should be considered. Additionally, even for
personal investors there are multiple methods of calculating the
capital gains on a currency sale, depending on whether you compute the
basis using average cost, FIFO, LIFO, lots, etc. This functionality
seems to be currently available to stocks but not currencies.

Post by Mike or Penny Novack
Before deciding what GnuCash should do need to see how this is normally
handled in old fashioned pen and ink on paper accounting.

Yes, I'd be interested to see a few different pen and ink methods. The
writeup by Peter Selinger is certainly one way to do it. I'd like to
see how he'd treat realized vs. unrealized capital gains. He's showing
a "Currency" account (really a "Currency Gains" account) whose total
reflects a mix of realized and unrealized gains in all currencies
(only two are shown in the writeup). At some point you'd want to
transfer the realized gains out of this "Currency Gains" account using
your favorite method for computing the basis.

-Charles

Post by Mike or Penny Novack
Michael