12.5. Tracking Currency Investments

Currency investment is when you decide to invest in a different country's currency, and hope that it will rise in value relative your own currency.

When you enter these transactions into GnuCash, you will have to decide on how much detail you would like to have.

If you are not interested in detail at all, a very simple account structure would suffice:

    Assets:Investments:Currency:Bank (USD)
    Assets:Investments:Currency:XXX (XXX)

You would simply enter transfers between the two accounts, noting exchange rates as you went.

But, if you do want to be able to track capital gains or losses, as well as any fees, you do need a more complex account structure, such as:

    Assets:Investments:Currency:Bank (USD)
    Assets:Investments:Currency:Currency Bank:XXX (XXX)
    Expenses:Investments:Currency:Currency Bank:XXX (XXX)
    Income:Investments:Currency Bank:Capital Gains:XXX (XXX)

12.5.1. Purchasing Currency

When purchasing another currency, you will buy a certain number of units of foreign currency with your own currency, at a particular rate. For example, you might buy USD 10,000 worth of Andorran Francs, at 5 Francs to the dollar, with a transaction fee of $150.

Buy Currency
Expenses:Investments:Currency:Currency Bank:ADFDeposit150

The Exchange Rate window should pop up when you leave the last row in the split above (Currency Transaction). If this window does not pop up, right click on the row or select Actions, and select Edit Exchange Rate. In the Exchange Rate window you specify the exchange rate you got from the bank.

12.5.2. Selling a currency investment

Entering a currency sale is done in the same way as a currency buy except that you are now transferring money from the Currency account to your Savings account (very similar to Section 9.7, “Selling Shares”).

The proper recording of the currency sale *must* account for realized gains or losses. This can be done using a split transaction. In the split transaction, you must account for the profit (or loss) as coming from an Income:Capital Gains account (or Expenses:Capital Loss). To balance this income, you will need to enter the Currency asset twice in the split—once to record the actual sale (using the correct amount and correct exchange rate), and once to balance the income profit (setting the amount to 0).

In short, a selling Currency transaction should look something like below, seen again from the Assets:Investments:Currency:Bank.

Table 12.1. Selling a currency with a Split Transaction Scheme

Assets:Investments:Currency:BankSold Amount - Exchange Fee 
Expenses:Investments:Currency:Currency Bank:XXXExchange Fee 
Assets:Investments:Currency:XXX Sold Amount
Income:Investments:Currency Bank:Capital Gains:XXX[LOSS]PROFIT
Assets:Investments:Currency:XXXPROFIT (with To Amount = 0)[LOSS (with To Amount = 0) ]