Accounting for transaction fees

LauS

Hello,

I'm trying to figure out how to account for some currency exchange and transaction fees. Here's the situation:

• Wave account is in CAD (I'm a Canadian tax resident)
• Invoices are primarily issued in USD
• My business expenses are in both CAD and USD

Given the situation where:

• I issue an invoice for 5000 USD
• Customer pays the 5000 USD, but I end up with 4980 USD because of SWIFT fees being taken along the way. I record a payment received for 4980 USD on that date, and Wave records it as 4980 x (that day's exchange rate) CAD.
• The invoice is paid in USD to a multi-currency virtual bank (think TransferWise, CurrencyFair, etc).
• When my bills come due, I may transfer some of that money into CAD to pay my CAD bills and pay others in USD directly.

The problems:

• How do I account for the SWIFT fees taken out? That is unrealised gain.
• How do I account for the actual exchange rate I paid, considering the conversion was at a different date than that of the invoice? That may be unrealised gain, or inversely some additional gain.
• How do I account for the FX commission, considering it's just taken from the converted amount, rather than issued to me separately?

Thanks for your help!

JordanD

Hey @LauS and welcome to Wave's Community! We are really excited to have you contribute to our online space

It sounds like you are collecting business funds in multiple currencies, however within Wave you are using one bank account. I'm definitely not an accountant (but welcome any of our Pros to jump in here), but I wonder if the situation would be better handled by creating a "cash and bank" account in your chart of accounts that is designated as a USD account. This way, when you add the income to the account, it will be in USD, you can do the same for the merchant fees and do one single FX adjustment rather than multiple times for each transaction.