Accounting entries for euros

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
Would somebody confirm the P&L and B/S entries for suppliers paid in euros, please?

Thank you

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    I've got one client who pays for some things in euros - luckily he always pays up-front so I can see what the £ amount is going through the bank account and enter the invoice for the same amount.

    I remember at a previous job though we did business with a company in Dublin and had to enter adjustments when the amount they paid us didn't match exactly with the amount invoiced.

    I would say that you should post as follows (please someone correct me if I'm wrong):-

    When the bill comes in for, say 100 euros, convert to pounds at the exchange rate for that day (www.xe.com is excellent for getting a rate) enter as:

    Dr £68 Materials account (or whatever else they're buying)
    Cr £68 Creditor

    When the bill gets paid say £70 clears the bank, then the entry would be:

    Dr £68 Creditor
    Dr £2 Exchange rate differences (expense account)
    Cr £70 Bank account



    Jodie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    Thanks, Jodie!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    Also, don't forget to account for any bank charges which are often part of the amount appearing on the bank statement.

    CR Bank £71
    DR Creditor £68
    DR Bank F/Exch charges / commission £1
    DR Exchange rate differences £2

    Sheelagh
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    Thanks Jodie and Sheelagh! Following on, can you please tell me how 1800 euros invoiced by a French supplier in August 2006 (as yet unpaid) will appear on the purchaser's Vat return ending 31/10/2006? What is the procedure? Sorry, this is new to me.

    Thank you.
    :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    I'd give the VAT helpline a ring if I were you - I think it's one of those situations where you're deemed to be the supplier and recipient of the goods/services, but it might be better to get an answer from the helpline based on your specific circumstances.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    I'm not very confident on this, but here goes. You don't say whether the invoice is for goods or services. The following is for goods, and assumes that the Franch business is VAT registered and has a note of your VAT registration number (so they don't charge you French VAT)

    You need to calculate a sterling value first. Today that is £1220.18 according to xe.com. For simplicity, lets make that £1000.

    The £1000 goes in box 9
    The tax on that amount ie £175 goes in box 2 and in box 4. So you are in effect accounting for VAT due, then claiming it back as input tax - net result - nil to pay, nil to reclaim.

    You cannot take advantage of the cash accounting scheme when dealing with EC acquisitions - you have to report according to the date of invoice, regardless of whether you have paid or not.
    If it was me, I think I would input a further "dummy" invoice or credit to adjust for any exchange rate differences when the invoice was paid, and show that transaction on the next return. Of if it's a small difference, write it off to the exchange rate gain/loss account and just keep notes for the VAT inspector.

    Have a look at the main VAT Guide Notice 700 section 5.8.3 and also The Single Market Notice 725 (especially if you have trouble sleeping!!)

    I hope this helps

    Sheelagh

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting entries for euros

    Thank you very much, Sheelagh! I will have a look.
    Can't sleep at all!

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