Foreign currency purchases & Losses - Currency Charges 7902

Accounting
1

My question relates to paying foreign currency invoices and how the realised losses and gains are calculated based on the GBP to USD exchange rate.

I’m finding that Quick File is recording realised losses for all of my foreign currency purchase invoices, because the GBP – USD exchange rate I get from the bank is never as good as the actual market rate (the rate provide by default from XE). The losses are averaging around £40 per invoice. These losses are shown in the chart of accounts ‘currency charges’ 7902 as they should do. I don’t mind these losses, but my question is, is it ok to have these losses, which are ultimately there because the bank hides their cut in the exchange rate, rather than the exchange rate actually shifting over time? I pay the invoices straight away, so if the bank gave me the market rate exchange rate I wouldn’t actually have a loss or a gain.

If someone could reassure me that it’s ok to record these losses, that would be great as it’s stopping me from recording payments on my purchases. If it’s not ok, should I just enter the exchange rate the bank gave me on the invoice, instead of letting Quick File use the XE market rate.

*I’m now using a currency broker rather than the bank, so I get a much better exchange rate and much smaller losses.

2

Hi,

I would say these are fine to have in your accounts.

Kind regards,
Chris

3

How about if account taging of transactions follows the real paypal based transnational logic of moving GBP or EUR to USD PAYPAL, all of them represented as a separate bank accounts with separate currencies as suggested in the forum. In this case i found opposite from above comment of xWill_Nicholls : usd purchases have not any gains/ losses because they are paid from a usd account. (Paypal). Gains are present at paypal foreign accounts showing different balance and then it can be moved to 7902 Currency Charges account from the settings of each bank account as has been suggested elsewhere in the forum.

Is this correct practice from accounting and reporting point of view or is it better to avoid the internal exchange of paypal and record as paid from GBP as suggested here?