I use PayPal to pay a lot of my foreign invoices.
When I log an invoice in my accounting system I use the exchange rate as per XE. com at the invoice date to convert it into British pounds.
I then make the foreign payment through PayPal. They convert the foreign payment into British pounds using their rate.
I therefore have a difference in what I recorded the invoice for in GBP in my accounting system and what it has cost me to make that foreign payment using PayPal. At the moment I just move the difference to Forex movement on the profit and loss.
Is this the correct treatment because I know PayPal charges a 2.5% exchange conversion fee so technically not all the exchange difference is down to the exchange rate movement. Some of the movement is down to the fee PayPal charge to convert the currency.