Receive foreign currency into base currency bank account
Software: MoneyWorks accounting software
What are the transactions involved in receiving foreign currency amount of an invoice into a base currency bank account?
Assuming we have a Sales invoice of USD 10, 000.00 at an exchange rate of SGD1 : USD0.8. Then, we received this amount, USD 10,000.00 and banked into our SGD bank account (Cash at Bank (SGD)). Due to the loss in exchange, the actual amount received in the SGD bank account (Cash at Bank (SGD)) is only SGD 12,350.00 instead of SGD 12,500.00 (based on house rate of SGD1: USD0.8).
The double entry for receipt of USD 10,000.00 is:
Credit USD Accounts Receivable: 10,000.00
Credit USD Accounts Receivable (currency delta): 2,500.00
Debit USD Bank Account: 10,000.00
Debit USD Bank Account (currency delta): 2,500.00
Note: USD Bank account is the clearing account used in this transaction.
We did use a SGD Bank account (Cash at Bank (SGD)) in our receipt transaction, why SGD Bank account (Cash at Bank (SGD)) was not part of the above double entry?
When a USD amount was banked into a base currency bank account (SGD), MoneyWorks created a payment transaction automatically to transfer USD 10,000.00 from USD Bank Account (clearing account) to the SGD Bank account (SGD 12,350.00).
The double entry for this payment transaction is:
Debit SGD Bank Account (Cash at Bank (SGD)) : 12,350.00
Credit USD Bank Account: 10,000.00
Credit USD Bank Account (currency delta): 2,500.00
Debit Exchange Gain/Loss: 150.00
