Supplier refund greater than original invoice

Accounting
1

In April, I paid an American supplier from my business bank account $799. My bank account is in GBP and does not show the original $ value, after currency exchange this resulted in a cost of £593.13. I created a purchase record in the regular way and tagged the transaction from my bank feed.

I have now received a full refund of the $799, but in the intervening two months the GBP-USD exchange rate has moved in my favour and the refund of $799 now equates to £598.37, a delta of £5.24.

How do I manage this? I have already tried:

  1. In my bank feed I have clicked Tag Me, Refund from a supplier, I enter the supplier name and I receive the error: “No qualifying purchases could be found to refund against. Make sure the corresponding purchase has been logged before you attempt to process this refund”
  2. In my original purchase invoice I have clicked More Options, Credit Note, and created the record. This creates the credit note against the suppler and also a tagged entry in my bank feed. This tagged entry is in addition to the untagged entry for the larger amount that I received from the supplier. Deleting the additional entry in the bank feed also deletes the credit note.
  3. In my original purchase invoice I have clicked More Options, Credit Note, and in addition to the original purchase line I have added an extra line on the credit note for Currency Charges for the £5.24 gain I have made. When I click Save Details I then receive the error: “The credit note amount cannot exceed the value of the original payment (593.13).”

I’m now out of ideas and I’d welcome suggestions how to deal with this situation.

2

Is the original purchase record in QuickFile denominated in USD for $799 or in GBP for £593.13?

The ideal way to handle it would be switch on multi-currency mode and then record the purchase record as US$799. QuickFile will assign a GBP value to the purchase based on the official exchange rate from XE for the purchase date. Log payment against the purchase, select your GBP bank account, and you can enter the actual GBP amount that left your account (£593.13), and the system will automatically assign to “currency charges” the difference between what you paid and what the purchase was originally valued at. Then for the refund do more options → credit note, credit the USD value in full and again when you select a GBP bank account to receive the refund then you will be able to specify the exact amount of GBP you received, and the difference will automatically go to currency charges.

If you recorded the original purchase as GBP at the converted value then you will either need to delete the original purchase and recreate it in USD as I describe above, or manually duplicate what the automatic currency revaluation logic would do:

  • tag the £598.37 money in as a bank transfer from a suitable holding bank account such as your Director Loan / Drawings account, or create a new merchant bank account to represent currency exchanges
  • more options → credit note on the original purchase and refund the £593.13 in full into the same holding bank account
  • manually create a transaction in the holding account for the £5.24 difference, and tag that via “something not on the list” to currency charges.