reconcilling a foreign bank account

mc25 Registered Posts: 232 Dedicated contributor 🦉

Just need some clarification from those who have dealt with this before. I've got a client who has got a Euro/Dollar account, thy use sage so thy convert the currency on b/statement to sterling pound, as you know you will always have a difference due to timing difference from when the invoice was raised to when it got paid. My question is when you come to reconcile the bank account, could you convert every single item to £ or could you pay out the invoice (to match invoice amount) then work out the difference at the end of the month (use the exchange rate at the end of the month)and post the adjustment to foreign currency adjust.

It will be interesting to hear how different people deal with this.



  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️

    On the occasions I've done this, there haven't been that many transactions, so for every transaction I have used the exchange rate in force one the date of the transactions (use or or similar).

    I then do the same with the ending balance on the statement - and the difference needed to reconcile the bank [nb: because of this you have to be extra careful with bank reconciling as the closing balance can't be a check due to exchange rate differences] is posted to the P&L as Exchange Rate Variance.

    With hindsight, I reckon if you use an average exchange rate and are consistent with it, and only pull up a current exchange rate at month/year end, you would be able to rec the bank in the normal manner with fewer adjustments and I think the net result would be the same. Exchange rates confuse the hell out of me though, so I was happier doing each transaction as I went along.

    I believe the relevant FRS says use the date in force at the time of the transaction but don't ask me to quote it :)
  • mc25
    mc25 Registered Posts: 232 Dedicated contributor 🦉
    thanks for your reply. I will read more about it, i know what you are saying its really confusing and you have got to keep ontop of it all the time.
  • oakley
    oakley Registered Posts: 73 Regular contributor ⭐
    Our EUR/USD account values the foreign currency transactions in the month by the current HMRC exchange rate in force for that week to get the sterling equivalent. At the end of the month the remaining cashbook balance is revauled at our month end exchange rate to give a sterling eqivalent and the balance written to realised exchange gain/loss.

    The EUR/USD invoices outstanding at month end should be revalued for by way of a unrealised revaluation journal, this would be reversed the following period until they were paid.
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