Mind Melting Foreign Currency Transactions and Current Account - Any advice?

Fukuyama · 28-11-2014 10:11pm #1

Hi Guys,

Quick question - I've searched the internet for days and can't find a definitive answer. For me (not a numbers guy), this is a head wreck and it's the only thing screwing up my bookkeeping.

However, I'm pretty sure I'm over complicating things. There must be an easier way.

How would I account for the following transaction:

A product is purchased off my website by Dave in New York. $150 USD goes into my USD denominated PayPal Account where it sits for a few days - during this time the (yet to be realized) Euro value of this sale is fluctuating a little with PayPals FX rate. I then transfer the $150 USD to my EUR denominated Bank of Ireland current account. Paypal give me a (crappy) rate of 1USD = 0.77 Euros. Central Bank rate is 1USD = 0.80 Euros. So, €115.50 goes into my bank account.

Now, from what I can tell a lot has occurred here:

I made a sale for $150. Do I record this in USD? Or the exact EUR amount when the sale is made, despite it still being in USD form?

A few days later, I transferred $150 to my Irish bank account (€115.50) at PayPal rates. If strict central bank rates were used then it would have been €120. This makes for €4.40 difference. So is this recorded a loss? An extra fee?

How do I record this sale? Do I record a loss on FX? Do I keep my sales account in dollars?

I'm genuineley lost.

If someone could dumb this down to five year old levels for me I'd really appreciate it.

Thanks!

Ps. I charge in USD as all of my clients are in the US. PayPal have no "auto-convert" feature or anything

.

rabbit123 · 29-11-2014 1:01am

Dean0088 wrote: »

Hi Guys,

Quick question - I've searched the internet for days and can't find a definitive answer. For me (not a numbers guy), this is a head wreck and it's the only thing screwing up my bookkeeping.

However, I'm pretty sure I'm over complicating things. There must be an easier way.

How would I account for the following transaction:

A product is purchased off my website by Dave in New York. $150 USD goes into my USD denominated PayPal Account where it sits for a few days - during this time the (yet to be realized) Euro value of this sale is fluctuating a little with PayPals FX rate. I then transfer the $150 USD to my EUR denominated Bank of Ireland current account. Paypal give me a (crappy) rate of 1USD = 0.77 Euros. Central Bank rate is 1USD = 0.80 Euros. So, €115.50 goes into my bank account.

Now, from what I can tell a lot has occurred here:

I made a sale for $150. Do I record this in USD? Or the exact EUR amount when the sale is made, despite it still being in USD form?

A few days later, I transferred $150 to my Irish bank account (€115.50) at PayPal rates. If strict central bank rates were used then it would have been €120. This makes for €4.40 difference. So is this recorded a loss? An extra fee?

How do I record this sale? Do I record a loss on FX? Do I keep my sales account in dollars?

I'm genuineley lost.

If someone could dumb this down to five year old levels for me I'd really appreciate it.

Thanks!

Ps. I charge in USD as all of my clients are in the US. PayPal have no "auto-convert" feature or anything .

I assume your presentation currency is Euro. SO when you make a sale in dollars, you will convert in spot rate of €/$ and lets say it makes €125 and when you receive money you got less or more resulting in Fx gain or Fx loss.

When you make a sale,

Dr Receivable €125
Cr Sale €125

you re translate it on closing rate (rate at the year end) at the end of accounting period if money is still outstanding.

when you receive the money

Dr Bank/ Cash €115
Dr Fx Loss €10
Cr Receivable €125

Mind Melting Foreign Currency Transactions and Current Account - Any advice?

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