How to book FX Gain/Loss on transfer from one bank account to another

JanPW

Hi,
my base currency is GBP. But I have a USD account with some dollars in it. I now want to transfer all the USD to the GBP account.
So I create a transfer between the USD and the GBP account. I amend the amount received, and automatically get a gain/loos on currency exchange transaction as well as the transfer. This looks fine to me.
The USD account now has 0 USD in it, but in the account transactions report I can see the USD account having a value of -111 GBP. This is a gain on currency exchange, as I took out more than what got into the account.
How do I book this, so that the USD account shows 0 USD and 0 GBP?
Thanks a lot
Jan

Barsin

Hey there @JanPW

I think the issue you might be experiencing is when you're creating your journal transactions, and entering an amount to move from one account to the other, that value that you enter is in your native currency. I set up a native currency USD account, then added a GBP account, and a CAD account and put $500 in all three of these accounts. When I went to create journal transactions (let's shorten these to JT's) and wanted to move $500 from my GBP and CAD account into my USD account, you'll need to type in the converted value rather than the native value, i.e I would need to enter $634.54 in my JT rather than $500. This is because a JT uses the native currency value.

See the image I've attached to show you the error I produced when trying to simply move $500 dollars, rather than converting it.

You'll see that my CAD and GBP don't balance because my JT's are only moving $500 USD not the converted currency.

I hope this makes sense! Please don't hesitate to reach out if you need more clarification!

JanPW

Hi Barsin,
thanks for your reply.
I did not use a JT, but the Wave Transfer, i.e. a withdrawal from the USD account and then making it a transfer by selecting the GBP account.
My USD value under the my accounts section is 0 USD, so I transferred the correct amount of USD away.
But when I look into my Reports under Account balances, it shows:
Paypal (USD) -£111.35
Does that make sense?

I think this is because I paid for example 500 USD into the account which were worth 400 GBP at that time. When I transferred the 500 USD to the GBP account, they were worth 511.35 GBP (this is just an example, not actual values) due to the currency gains I made as the USD was stronger when I sold.
How do I book this? I have no idea...

Thanks
Jan

JamieD

Hey @JanPW I've spoken to a member of our Wave Plus team and we've come up with an answer for you in this situation -- it is a bit of a software issue at this point.

Wave has already recognized your realized gain on this: when you recorded the transfer from the USD account to the GBP account, the gain was recognized (you mentioned this in your first post). The negative balance in the USD account is the result of cumulative differences in exchange. You can zero it out on the reports if you want.. but this will then throw of reconciliation if you continue to use that account, and it will also cause the balance on the Transactions page to be inaccurate (this is less important, because it’s the reports that truly matter at the end of the day).

If you want the USD account to show as $0 on the Balance Sheet, the best way to do that would be to debit the USD account for 111, and credit “Cumulative Translation Adjustments” (Equity account) for 111. This will allow the USD account to show as 0 in the reports, but again, it will throw off reconciliation moving forward, and cause the balance to show incorrectly on the Transactions page in the “All accounts” section. You may want to consider ignoring the negative 111 balance, and just be sure to flag it for your accountant come year end.