My main supplier is also my client and they are in the USA. I read this post
http://community.quickfile.co.uk/t/contra-invoicing-same-customer-and-supplier-netting-off-receivables-and-payables/345
which confirmed my thoughts on the best way to deal with this but can I just check:
If I set up a new ‘contra’ bank account in USD then as lobg as all invoice are in USD can they contra without issue or exchange rate problems?
Also should it be a ‘Petty Cash’ account type?
Hi @tc5440
This should be fine. As long as the bank account is in the same currency as the invoices (USD in this case), then there’s no need to worry about the exchange rates either. However, you may wish to record a currency loss/gain to ensure your balance sheet is accurate.
Let us know if you need any help with this.
As for the type of bank account, loan account should be fine for contra accounts.
Hope that helps!
I don’t think the type makes much difference, but to me it feels most like a merchant account as it’s a record of money that belongs to you (the income from your sales) but is held by someone else (as credit on your account with the supplier). Or vice versa.
please can you explain?
As currency fluctuates it could be worth more today than it is tomorrow. So what you may wish to do is account for this difference with a journal.
If you go into the foreign currency bank account settings, there is an option to record this (it creates a blank journal for you).
As everything is recorded in GBP for reporting etc, you may wish to correct the GBP value. However, if you’re only dealing in minor amounts then it’s not always worth it. When you create an invoice, the exchange rate is recorded too, so it’s only if the money is sat here for a long period.
As always, I’d recommend running it past an accountant if you’re ever unsure.
I see what you mean. To keep this simple for myself I always adjust the rate when I receive the invocie and pay it to reflect the actual so that I do not collect any Exchange Rate Variance. This only becomes an issue at year end but as long as outstanding POs and invocies are cleared before running the YE it should be fine. Yes for the Contra account I can see now how it could be an issue.
Thanks
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