Currency trading accounts

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.