How to deal with accounting hell because of multiple currencies/countries involved?
How to deal with accounting hell because of multiple currencies/countries involved?
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CodePanda · External communityPost link
External question — Personal Finance Stack Exchange
Author: CodePanda
Original post: https://money.stackexchange.com/questions/163512
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I am from India. I live in Europe and I earn from US as a freelancer.
I have so many accounts and I don't know what to do
USD business account - Receive money from clients
USD personal account - For personal expenses
Another USD personal account - My usual personal USD accounts blocks transfer to crypto exchanges
EUR personal account - For local transactions where USD account doesn't work
INR personal account - For personal transactions in India and to fund Indian broker
Another INR personal account - The other INR account have problem receiving funds from USD bank account, so this account just receive the money and route it to other INR account
Apart from this, there are multiple broker account and credit cards.
I have a google sheet where I add balance in each account every month. This way, I am aware of my net worth. I also have another sheet where I add invoices payment received.
But, I have no way to track my expense because money flows in random direction all the time. There is no single account. My net worth fluctuate with stock market so it's even harder to track expenses
What should I do?
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Philipp · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Philipp
Original post: https://money.stackexchange.com/a/163522
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
When you are regularly doing business in different currencies, then it can make sense to track your income, expenses and net worth in each currency separately.
That means your bookkeeping would have one book for USD, one book for EUR and one book for INR, each one with a separate balance, a separate income and expense flow and a separate monthly budget. Each of those books would then have a sub-account for each actual account denoted in that currency (personal bank account, business bank account, credit card, etc.).
That way you avoid chaos due to currency fluctuations. Calculating your net worth according to the current exchange rates might be interesting, but is probably not actually that important or meaningful. Exchange rates rarely reflect the true purchasing power of each currency anyway. Exchange rates fluctuate. And you want to avoid buying one currency with another as much as possible, because that usually means you pay conversion fees. Which means that tracking 3 net-worths in 3 different currencies is probably more meaningful than trying to calculate one net-worth in one currency.
OK, but what if you notice that one of these books has a negative monthly cash-flow, which you can't get positive without taking money in another currency? Then you have to bite the bullet and convert currency from one to another whenever you are about to get bankrupted. This would appear as an expense in the book of currency A and as an income in the book of currency B. If you have to do that regularly, then it might be useful to consider this a monthly income/expense in your respective budgets. But keep in mind that currency exchange rates change, so you have to make sure the numbers are still accurate.
When it comes to stocks, real estate, cars and other non-cash assets you own: There is a reason why business bookkeeping separates the tracking of
current assets
from that of
fixed assets
. It's usually not useful to treat such assets as if they were cash. Why? Because you can't pay for groceries by cutting off a piece of your car. While you could
theoretically
sell those assets at any time,
in practice
you are not going to do that because you need those assets, finding a buyer and executing the trade will take time and effort or the current market situation makes it a bad time to sell them. Well, maybe you could get a loan backed by one of those assets to temporarily turn them into liquid cash, but such loans usually come with conditions that make them attractive to only the thoughtless or the desperate.
Which means you might want to keep those assets in separate fixed asset accounts and update the value of these assets perhaps once a year to account for deprecation and stock price changes.
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: Philipp Source score (net votes, not local likes): 3 Original post: https://money.stackexchange.com/a/163522 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. When you are regularly doing business in different currencies, then it can make sense to track your income, expenses and net worth in each currency separately. That means your bookkeeping would have one book for USD, one book for EUR and one book for INR, each one with a separate balance, a separate income and expense flow and a separate monthly budget. Each of those books would then have a sub-account for each actual account denoted in that currency (personal bank account, business bank account, credit card, etc.). That way you avoid chaos due to currency fluctuations. Calculating your net worth according to the current exchange rates might be interesting, but is probably not actually that important or meaningful. Exchange rates rarely reflect the true purchasing power of each currency anyway. Exchange rates fluctuate. And you want to avoid buying one currency with another as much as possible, because that usually means you pay conversion fees. Which means that tracking 3 net-worths in 3 different currencies is probably more meaningful than trying to calculate one net-worth in one currency. OK, but what if you notice that one of these books has a negative monthly cash-flow, which you can't get positive without taking money in another currency? Then you have to bite the bullet and convert currency from one to another whenever you are about to get bankrupted. This would appear as an expense in the book of currency A and as an income in the book of currency B. If you have to do that regularly, then it might be useful to consider this a monthly income/expense in your respective budgets. But keep in mind that currency exchange rates change, so you have to make sure the numbers are still accurate. When it comes to stocks, real estate, cars and other non-cash assets you own: There is a reason why business bookkeeping separates the tracking of current assets from that of fixed assets . It's usually not useful to treat such assets as if they were cash. Why? Because you can't pay for groceries by cutting off a piece of your car. While you could theoretically sell those assets at any time, in practice you are not going to do that because you need those assets, finding a buyer and executing the trade will take time and effort or the current market situation makes it a bad time to sell them. Well, maybe you could get a loan backed by one of those assets to temporarily turn them into liquid cash, but such loans usually come with conditions that make them attractive to only the thoughtless or the desperate. Which means you might want to keep those assets in separate fixed asset accounts and update the value of these assets perhaps once a year to account for deprecation and stock price changes.
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