Discrepancy between account balance and balance sheet

Hi there

I sell services through fiverr and have a merchant account in usd to record these and the fees fiverr charges.

This merchant account balances perfectly with what fiverr says they own me.(currently zero as transfer all funds to current account.

However if I run a balance sheet it shows a liability of arround £44 against the merchant account.

I’m a little confused why is happening would be due currency losses / gains that I need to take care of manually? I’m uk based to the core currency of my business is gbp while I do make sales/purchases in usd

Which currency is the merchant account denominated in? I’m guessing USD given your next paragraph, so currency fluctuations are probably to blame.

Foreign currency bank accounts in QuickFile will tend to drift a bit on the balance sheet because while the foreign currency balance is accurate, there’s an underlying GBP balance which is what appears on your balance sheet. Each individual foreign currency transaction is converted to GBP on the date that it happens. If it involved an explicit currency conversion then it uses the implied rate (e.g. a payout from a USD merchant account to a GBP bank account would be valued for balance sheet purposes at whatever GBP value arrived in the destination account, regardless of how many USD it was for), if there’s no explicit conversion then it’s valued at the xe.com mid-market rate for the day.

So your receipts from USD invoices into the USD merchant account will be valued at the XE rate on the date you were paid in USD, but the payouts will be valued at the GBP you received after bank charges.

To fix this there’s a facility in the settings for each foreign currency bank account to create a special journal to record a currency loss/gain - this will re-calculate the GBP balance sheet value from the USD balance at today’s exchange rate and journal the difference to “currency charges” without changing the USD account balance.

Many thanks for that. I’m guessing it’s only really going to obvious where the currency account balance is reduced to zero - like mine is currently.

Would you advise it’s best policy to pass these currency Journal entries to record the currency fluctuation when ever the balance is reduced to zero or at the end of each year if the balance is zero

You can do it as often or not as you like - at year end definitely, so your year end accounts are accurate, but you can do it more frequently any time you want to be able to see an accurate balance sheet.