As an UK company, we would like to establish a fully-owned subsidiary overseas. From accounting point of view, we need to record ownership in foreign currency and record currency gain/loss automatically in the Year End journal.
I already created an account in Chart of Accounts, under Assets and Liabilities (0001 - 2999) category with “Stock” sub-category as “Shares in Subsidiaries (EUR)”.
What could be the recommended way to handle this case in QuickFile? How I can record EUR capital payment in such way that QuickFile would automatically calculate gain/loss based on effective exchange rate?
Thank you for your response. I have already talked with my accountant.
My accountant advised that there should be an account in Chart of accounts (which I have created and provided details in my first message), and when share capital is paid the transaction should be recorded as a foreign currency transfer from GBP bank account to EUR Shares account in the accounting system. If it is done properly, accounting software should be able to calculate GBP equivalent value of the account when it is needed.
I was asking -as you said- how I can do it in QuickFile.
In QuickFile it’s only bank accounts that have any notion of a foreign currency balance - a regular “assets & liabilities” nominal account only knows about GBP. So you would need to create a EUR-denominated bank account in the banking section to represent the shareholding rather than a plain nominal in the chart of accounts. This would get a nominal code in the 12xx range rather than the stock range (this is not configurable) but it’ll still be under assets & liabilities more generally.
Once you have this EUR bank account then as Steve says you can record a cross-currency bank transfer from your GBP current account to the EUR shares account and set the EUR amount appropriately. The balance sheet balance corresponding to this bank account will be the GBP amount you originally tagged, but then the “record a currency gain/loss” mechanism can be used to periodically re-value the balance sheet entry at the prevailing exchange rate. By default this process moves the difference to 7902 currency charges but you can change that to another custom nominal if you want to keep the gains/losses from your share holding separate on your P&L from any gains/losses from other foreign currency transactions.