Forum Message

Foreign Currency Invoices

I have a question as to how to handle foreign currency invoices. I have a client I wish to invoice in EUR. How do I account for the exchange rate gain or loss when the invoice is actually paid?

I suppose I can create an income account "Exchange Rate Gain" and an expense account "Exchange Rate Loss" to deal with the discrepancy between the EUR/GBP exchange rate on the date of the invoice and the date when it is paid, but can I create a single invoice payment transaction which accounts with the transaction as seen on my bank account statement?

Thanks.


Posted by David McCann on Jun 7, 2011 10:00 AM BST

Hi David,

The easiest thing to do is to record the full payment of the invoice, then a General Transaction between the Cheque Account and exchange rate income/expense account.

However, this will produce two transactions in your Cheque Account where you bank statement only shows one. If you really want to avoid this, I recommend you do the following:
1. Create a new asset account called 'Foreign Payments Control Account'.

2. Record the invoice payment as being paid into the account for the full amount of the invoice.

3. Record a General Transaction between the control account and the exchange rate income/expense account.
4. Record a General Transaction to transfer the balance from the 'Foreign Payments Control Account' to the 'Cheque Account'.

Regards


Posted by Mark McLaren (Solar Accounts) on Jun 7, 2011 12:04 PM BST

Hi Mark,

Thanks for the quick response!I think the first option is much easier but will ask my accountant if the second one is more correct.


Posted by David McCann on Jun 9, 2011 12:05 PM BST