I am in middle of finalising our year end accounts and while checking balances on chart of accounts for the year end, I saw our Barclays USD A/c & Transferwise USD A/c balance is different to that of our are balances showing in nominal A/c.
I understand the currency difference between USD and GBP values. However even after taking that into account the difference is a lot. More so the problem is Nominal account shows correct amount ($1959) however the balance in charts of accounts & trial balance shows incorrect after taking into account the USD : GBP values (£377 given in charts of a/c = $490 if USD = 1.3 x GBP approx) there is still a difference of more that $1200.
The CoA doesn’t show balances at a date, it shows the net total of transactions on each nominal account between the selected dates.
If you want to verify the nominal balances then you need the Trial Balance report instead - this one shows three columns for each nominal, the opening balance at the start date, the sum of transactions for the period, and the closing balance at the end. The middle column is what you get from the CoA, but the right hand column is the one that you can check against your bank accounts and balance sheet.
The trial balance is 30/09/2022 and the right most column shows the balance is GBP on the 30/09/2022 is not matching the balance with nominal account balance on 30/09/2022 even after I convert USD to GBP
Foreign currency accounts tend to drift in QuickFile, because the GBP conversion is done on a transaction by transaction basis at the rate that applied to that particular payment (which may or may not be the market exchange rate for that day - e.g. if you make a transfer from a currency account to a GBP account the GBP balance sheet value of the transaction in the foreign currency account will be equal to the GBP amount received on the other end).
There’s a tool on the foreign currency bank account settings to “record a currency loss/gain”, which creates a special type of journal that modifies the GBP balance sheet nominal value of the currency account without affecting the balance in the foreign currency. You can use this tool to effectively “re-value” the foreign balance in GBP at the prevailing exchange rate on your selected date, with the contra entry for the adjustment going to “currency charges” on your P&L. It’s a good idea to do one of these adjustments for each account on your year end date at least, but you can do them more often if you want to keep a closer track of your exchange gains or losses during the year.
