Opening balance EUR account, closing account, and differences

[Michel]

Hi all,

I noticed something on a EUR account while I was reconciling it up until its closure with a zero balance.

The account has had an opening balance, which I duly recorded in the account’s settings in EUR. Then transactions flowed in, and all was good, until all money was withdrawn (moved to the main GBP account) to set the EUR account to 0.00 € and close it off a few days ago.

The EUR transactions and balances in Quickfile nicely check out and reconciliation against bank statements were perfect. But, its nominal counterpart account in GBP shows not what I expected - I thought it being £0.00 as well, but it is not at all.

I then discovered that Quickfile had taken the opening balance amount (which was in EUR) and recorded it on the nominal with the identical nummbers, but in GBP, as a drawing on the Director’s Loan Account. While the logic was correct, the amounts are clearly wrong.

So, I deleted the opening balance from the account settings (which also deleted the drawing from the DLA), and manually added a transaction on the EUR account to the correct opening balance. Then I tagged it as a draw on the DLA, this time adding the correct GBP amount, as suggested by Ian here: Opening balance for foreign account

However, while the EUR current account nicely balances to 0.00 € at the end, its nominal counterpart still stands at a significant GBP amount. This amount is close to the opening balance but not quite, which I suspect are currency valuation gains/losses (of GBP 0.84). If that is true, then the GBP nominal will for ever record as a current asset on the balance sheet, while in reality it is not.

In Quickfile, the NET value of the nominal is in debit of opening balance plus the suspected currency gains/losses.

What am I missing?

Cheers,
Michel

[Michel]

Another thought - is the difference I see on the GBP nominal the difference between the xe.com exchange rate and the originating bank’s exchange rate?

If so, is it valid to balance the GBP nominal down to £.00 against nomianl account (7902) Currency Charges?

[QFMathew]

Hi @Michel

You’re correct. When a transaction is recorded in a currency other than GBP, we record the equivalent for reporting purposes (as all reporting is done in GBP).

So over time, it’s likely that a balance will build up from the currency fluctuations.

Journaling is the correct way to do it, and there’s a built in function for you to be able to do this on non-GBP accounts. Take a look at this guide: Invoicing in foreign currencies

[Michel]

Hi @QFMathew

The invoices were raised in EUR, and paid in EUR, and then the money transferred from the EUR account to the main GBP account.

Does that mean I can/should journal the entire difference at account closing date from (1204) “EUR account” to (7902) “Currency Charges”?

Thanks,
Michel

[QFMathew]

Even though it was all done in EUR, there are still GBP entries in the background for the reports.

Invoices are handled automatically in QuickFile; you should see the “realised” gains/losses at the top of the invoice itself. But the bank balance would be manual.

If the balance of the EUR account is now €0,00 but you have a GBP value in your chart of accounts, then it sounds reasonable to journal the GBP difference using the method I mentioned above. This way, it doesn’t affect the bank balance, but will adjust the GBP value.