Exchange Gain/Loss with Currency Accounts

Exchange Gain/Loss with Currency Accounts

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Hi There,

I'm a little confused about how accounting software is supposed to handle exchange gains or losses.

We use quickbooks and handle currency using currency accounts i.e. if we invoice in EUROS, we are paid in EUROS into a EURO account.

We regularly take advance payments with order, which are invoiced at time of shipment, perhaps 3-5 months after the deposit is sent. I understand the concept of exchange gains/losses in these circumstances, if we were invoicing in Euros and taking payments into a GBP account.

Quickbooks, however, shows an exchange gain or loss when EUR is invoice and paid into an EUR account, so there are no gains/losses in real terms.

Can anyone advise how we should handle this?.Thanks in advance,

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By paulwakefield1
09th Jun 2014 13:36

I don't know Quickbooks

but I assume it is reporting the fx difference between the rate ruling at the invoice date and the rate at the settlement date. This would be a real fx difference as the value of the Euros has changed. (I am of course also assuming that Euros is not your reporting currency!).

To avoid this, you would need to maintain a constant exchange rate in your system which may be viable if the rates are fairly static and just restrict yourself to, say, a year end change. However the £ has appreciated a reasonable amount against the Euro in the last year so, unless you have little foreign trade, this may not be possible.

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By shazjeff99
10th Jun 2014 17:21

As above - when acting as agent

HI

Further to the question and answer above - how does this apply when the company is acting as "agent" rather than principle.......do we still have to recognise the fx gain/loss in our P&L?

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