The tool I’m referring to is the “journal out a currency loss/gain in a foreign bank account” section of this KB article.
When you have a bank account in QuickFile that is denominated in a currency other than GBP, QuickFile actually maintains two parallel balances for the account, one is the actual foreign currency balance (in USD in your case) and the other is the balance sheet balance which is always in GBP. Any time you make a foreign currency transaction QuickFile records both the change to the USD balance and the corresponding change to the GBP balance caused by that transaction. For a foreign currency payment this will be the GBP value of the currency amount at the date of the transaction, for a “transfer between accounts” it will be whatever amount of GBP you set for the other end of the transaction. As you can see, this will mean that the underlying GBP balance on the balance sheet will naturally drift one way or other away from the “true” value of the asset (the value of the USD balance if it were converted to GBP at today’s exchange rate) as different transactions happen at different exchange rates.
The tool I referred to is how you correct for this drift, what it does is adjust the balance sheet GBP balance without changing the USD foreign balance, by calculating what the USD balance would be worth at a given date’s exchange rate, subtracting that from the drifted GBP balance, and putting the matching entry onto your P&L to recognise the gain or loss caused by the accumulated drift.
The £100 “loss” on this year’s P&L counteracts the mistaken £100 gain caused by converting the balance at the wrong rate last year - that’s the point where the £100 was “created out of thin air”.