Foreign currency exchange
Anne H
Registered Posts: 4 New contributor 🐸
Hi there
I have a new client who trades with companies outwith the UK and receives trading income in US dollars. He also purchases assets outwith the UK to use in African countries and is invoiced in US dollars.
Just before the £ started to devalue, he was invoiced for 2 vehicles in dollars. He held off paying for them for 5 months. By that time the £ had devalued so much he made a foreign currency exchange loss of approx. £20,000.
His problem was that he had insufficient funds in his us dollar a/c to pay the invoices when they were issued. Whilst he eventually managed to pay the face value of the invoices, he lost out in the exchange rate when transferring funds from his current a/c to dollar a/c to pay the invoices.
What would be the bookkeeping entries for the loss between both bank a/cs?
Nasty one here! Hope you can help!
I have a new client who trades with companies outwith the UK and receives trading income in US dollars. He also purchases assets outwith the UK to use in African countries and is invoiced in US dollars.
Just before the £ started to devalue, he was invoiced for 2 vehicles in dollars. He held off paying for them for 5 months. By that time the £ had devalued so much he made a foreign currency exchange loss of approx. £20,000.
His problem was that he had insufficient funds in his us dollar a/c to pay the invoices when they were issued. Whilst he eventually managed to pay the face value of the invoices, he lost out in the exchange rate when transferring funds from his current a/c to dollar a/c to pay the invoices.
What would be the bookkeeping entries for the loss between both bank a/cs?
Nasty one here! Hope you can help!
0
Comments
-
The loss due to exchange rates is a debit to the P & L. I would usually include under finance costs as a seperate headed item.0
-
Currency Translation Losses/Gains P&L item.0
-
If he deals in large foreign currency transactions in the future he could always look at hedgeing against currency movement, not always a good idea to try and make money through hedges, but a good idea not to lose money through them.0
-
Many thanks for your replies
Anne0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 318 NEW! Qualifications 2022
- 161 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership