Like other legacy users, I now must specify a base currency if I want to see $ symbols on invoices, etc. This is because the old Currency Prefix/Suffix setting has been removed. I have no other need for multi-currency capability.
Nevertheless, I now have the control account Foreign exchange gains (losses) appearing in my Expenses group. Of course, I cannot delete this. So I thought I would figure out how it works. There is no documentation I can find in the Guides, and much of the Forum discussion is obsolete, especially since introduction of the new chart of accounts scheme.
My first question is whether the account is incorrectly named. The name shows losses in parentheses. But a forex loss is an expense, which should show as a positive value in an expense account. Shouldn’t the default name be Foreign exchange losses (gains), reversing the sign convention? If I make money on forex, should that not show as a contra expense, in parentheses?
The naming is correct as Income is positive, gains is positive. You are mixing up Positive/Negative with Debit/Credit. They are not directly related.
If you recall the P&L total used to be called Nett Profit/(Loss) - The brackets indicated a negative result not a Debit figure
More importantly why is it there at all, what TAB requires its existence?
It just polluting the chart of accounts
I agree that the normal, broad convention is to show gains as positive and losses as negative, usually putting the negative amounts in parentheses. But because expenses are understood to contribute to losses, as opposed to gains, they are also shown as positives in a a P&L statement, as long as they are under an Expenses heading to make it obvious that they are to be subtracted from income to yield net profit. My concern is that the naming of the account follows the usual convention of making losses negative, but places the account in the Expenses group. If it is going to be named the way it is, I would expect it to be grouped with income accounts. Since I don’t use it, I don’t know how the numbers will show when they represent a loss on forex. In other words, I am wondering whether this account follows the conventions Manager uses for debits that appear in other expense accounts.
Why is it there? Because when you specify a base currency, you activate the multi-currency capability in Manager. This used to be a separate capability, activated under Customize. Now it activates automatically whenever something is input in a second currency. And Exchange Rates settings automatically appear at the same time, along with the forex gain/loss account. This is similar to what happens when you activate Billable Time or Billable Expenses: the necessary work in progress, markup, and movement accounts automatically appear. These control accounts cannot be deleted because Manager would have nowhere to place certain transactions.
I viewed this overall change as a big and unwelcome complication when it appeared. The ability to simply specify a currency prefix/suffix was quite nice. The current scheme, in my opinions, violates the design principle of being able to only activate what you need. Everyone needs a currency prefix or suffix. Many do not need multiple currencies and the accounts that go with them.
To your point 1, there shouldn’t be an amalgamated account but two separate accounts - one income one expense - the netting/contra of income and expenses should be avoided as it contradicts full disclosure. This amalgamation doesn’t occur with the disposal of fixed assets, the gains and losses are posted to separated accounts
To your point 2, I have just deleted my base currency and it has disappeared - yippee -.as I don’t need to have currency symbols on my documentation it can remain inactivated.
I agree with your point entirely, just selecting a currency symbol shouldn’t make the assumption that you are going to have multi-currency transactions. Perhaps the Settings - Base Currency option should a multi-currency tick box, if ticked, triggers the respective account in the chart of account
What do you mean by base currency? - No selected currency
If I leave base currency “empty/unallocated” then no exchange account appears
As soon as I select a base currency then the exchange account appears
Also, I have two companies setup and if I set them both to the same base currency, they both have exchange accounts which seems to conflict with your quote above unless by base currency you mean no selected currency. Just seeking clarification.
@lubos, I see that the forex gain/loss account now appears only when a foreign currency has been introduced somewhere else in Manager. That’s excellent.
But you say my concern about reversal of the sign convention has been fixed. I don’t see that. For example, if I create a new cash account and denominate it in a different currency, exactly the same account as before appears in the same place. That is, Foreign exchange gains (losses) appears in the Expenses group. When you said it was fixed, I expected to see either (a) an account of that name, but moved to Income or (b) an account in Expenses with wording reversed to Foreign exchange losses (gains). Am I missing something, or am I misunderstanding you?
@brucanna, can you clarify what you mean by this? I see only one account for loss on disposal of fixed assets. It shows up under expenses even when there are no asset disposals. I see no corresponding account for gains on disposal of fixed assets. I have always wondered why that is.
@lubos, if @brucanna is correct about gains and losses on disposal showing up in different groups, how would I activate the gains account? Since it would have to be linked to other fixed asset coding, I obviously cannot just create an income account with that name. Or is the proper question why I see the losses account when there have never been any losses?
One is there some way to have the account only actually show when there is a currency gain or loss as I use British Pounds, but pay two suppliers in US Dollars. I pay both of them whatever the exchange rate is at the time, so I never have a currency gain/loss. For most people like me the currency gain/loss thing is irrelevant so I am sitting with an empty account that I will never use!
Same concept with rounding expense. I don’t use that as my clients found it did not work for them, so again sitting with an empty account I will never use - Is it not possible to “turn off” rounding in settings thus removing the unused expense account as it will never be used by me!
Same concept for journal entries. I have never used this once! But I cannot delete the tab! Again could we have an option to hide the tab.
This is only correct if you generate your Profit & Loss on cash-basis. On accrual-basis, you should definitely have currency gain or loss.
This account only shows if you use rounding on at least one invoice. You need to find that invoice and make sure no rounding option is selected but careful. This will change the total of invoice so you might need to add extra line item to round the total manually.
Every business will have entries which cannot be recorded any other way but by journal entry. Profit distribution or recording provision for income tax are such examples.
For new accounting entities it does appear in Income group. For older ones it could still appear under expenses but it’s easy to move to income if desired.
I did not realise that the rounding expense only showed if I had any rounding in any invoice. I will hunt that invoice down! I had originally meant to use rounding, but my clients did not like it as it messed up their purchase orders, so I abandoned that idea and I was not aware that I had rounding on any invoice. Thanks.
Would it not be possible to do corporation tax outside of the journal entries in the future? I presume that your long term plan would be to add functionality to enable businesses to pay corporation tax outside of journal entries - we already do that for VAT returns. Its not a problem having the journal tab there, but it would be nice to get rid of tabs that I basically never use or will only use once a year!
Would it not be possible to say if Accounts are setup for cash basis don’t show currency gain/loss, but if using accrual then show currency gain/loss?
The currency gain or loss can still be on cash-basis. For example, if you maintain bank accounts or cash accounts in other than base currency.
But I do agree on one thing. If foreign currency is used on customers/suppliers only, then there won’t be ever any currency gain (loss) on cash-basis so this is something I could take into an account.
By the way, to find the invoice which is using rounding, simply generate profit & loss statement for the period since you started using Manager.
Oops, you have caught me out misinterpreting a response in another topic.
Lubos had stated “difference between selling price and book value of asset would be automatically posted as gain (loss) on sale of fixed asset” which I read as two accounts. Where in fact he was quoting the actual account name.
It interesting that with both exchange and fixed assets, Manager assumes losses are more likely to occur by placing them in the Expenses group. You could always edit the name in the Expenses group, create accounts in the income group and Journal across the income producing transactions
When you state “why I see the losses account when there have never been any losses” I assume you are referring to the P&L. Manager seems to have this need to show accounts regardless if they have a balance (or even a transaction).
Maybe a future nicety would be - only show non zero accounts in reports, especially for TAB created control accounts
This is not the case, at least not for me. I have several accounts I originally set up in my chart of accounts that, by coincidence, have never had entries in three years. They have never shown on my P&L. I think about getting rid of them, but since they don’t show up on any reports, I have not.
Yes, I saw that I was able to move it. But I didn’t know what that might do to the math. If I move the account to Income to reflect its default title, will signs reverse? That is, will a gain on disposal show as a positive under Income? (Remember, since I haven’t used it, I’m assuming a gain on disposal would currently show as a negative under Expenses.)
Of course, I also realize I can rename the account, but it seemed wise to fix the default name to reflect default behavior.