How do I account for currency exchanges?

Accounting
1

I’ve read lots about how to account for paying foreign currency invoices, but how do you account for direct currency exchanges when the exchanged money just sits in a bank account?

I use a peer to peer currency exchange market place called Currency Fair. In essence, it works by depositing money into a base currency account (in my case GBP). Then you can convert an amount into a different currency, in my case USD – (Currency Fair make their margin in the exchange rate they give you). Then you can pay foreign currency invoices from that account, when you do, Currency Fair also charge a small transfer fee. In effect, I have two bank accounts with Currency Fair, a GBP one that I deposit into, and a USD one that I pay invoices from.

I’m confused about how to account for the currency exchange / transfer between the GBP base currency account to USD account.

These are my solutions, but not sure either is correct.

Idea A:

I transfer GBP from my current account into a currency fair GBP account that I’ve created on QuickFile. I then enter a ‘money in’ USD transaction into a Currency Fair USD account and tag that transaction as a bank transfer from the Currency Fair GBP account, entering the transferred amount in GBP. I can then record payments for my USD invoices from the balance in the Currency Fair USD account.

This method works fine, but it doesn’t account for my currency exchange ‘order’ from Currency Fair, nor does it account for currency variation losses and gains, which I think it probably should?

Idea B:

I transfer GBP from my current account into a Currency Fair GBP account. Next create a purchase invoice for the Currency Fair order (the order being for the GBP to USD conversion) and then pay for it from the Currency Fair GBP account. This records the transaction and tracks the currency variation losses and gains. The problem is how do I then get the USD amount into the Currency Fair USD account? When I enter a ‘money in’ transaction into the USD account, what would I tag it as? I’ve found that I can tag it as a refund from Currency Fair, but I’m not sure that’s ok?