Foreign Exchange probem

philip456philip456 Member Posts: 15

My home currency is GBP.
I had $422.87 in a "Cash - USD" account. I exchanged the whole $422.87 and got £304.28.
I entered a transfer of $422.87 from the "Cash - USD account" into my "Cash on hand" account.
The "Cash-USD" account showed a balance of $0.00 which is correct but also a balance of -£38.49.
How can that be? They should both be zero. How can -£38.49 be the same as $0.00?

The "Cash on hand" (GBP) account showed,

So, cash on hand was increased by £322.88. The reality was that I received £304.25. A difference of £18.63.
I've read the article on Accounting for foreign currency transactions but I'm still not sure how to correct these two issues?

edited April 12, 2019 in Accounting Technical Support


  • ZoeCZoeC Administrator Posts: 389 admin

    Hey @philip456, thanks for reaching out to us in the Community! :smile:

    Just to begin with, this is an extremely complex forex issue therefore I strongly recommend reaching out to your accountant for more insight! I can speak a little to how Wave handles these transactions, but a professional opinion is advised :smile:

    When accounting for foreign currency transactions in Wave, you should be utilizing your gains/loss accounts. If you are only creating transfers from GBP to USD, you are not accounting for the fully adjusted exchange rate. You will need to record your gains/losses in a Journal Transaction, I have attached Help Centre article, so you can see examples of these Journal Transactions.

    In saying this, it is expected behaviour for you to not see a zero balance in your cash/bank accounts but your over all reports will be accurate, due to the correct addition of your gains/losses. The adjustments take place in the gains/losses accounts, so even though you will not see a zero balance, the exchange is reflected. I understand that this is quite complicated and not very straightforward to carry out, so please let me know if you have any questions. :smile:

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