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frenchery's avatar
frenchery
Contributing User
6 months ago

Bank account reconciliation with two different currencies

Hello, I am the owner of a small business using a Business Lite subscription. As part of my business operations, I need to purchase items in a foreign currency EURO. I created in MYOB a separate b...
  • Mike_James's avatar
    Mike_James
    5 months ago

    Hi frenchery , if your MYOB bank account has a positive value at end of year, then you should record a spend money at that date. This will reduce that balance to zero. Allocating that spend to a currency variance account will show that reduction as a loss, which is a realised loss, ie actual and permanent.

    The currency variance account is usually set up in your income or cost of sales section, definitely not adjacent to your bank.

    The unrealised losses figure will have been calculated by comparing the value in AUD of any foreign currency assets/liabilities, using exchange rates at that date, with the MYOB book value at the same date. 

    Reconciling your EUR account in MYOB is tricky because in MYOB it is only in AUD. You may need to keep a separate analysis so that you can see a running balance in both currencies.

     

Mike_James's avatar
Mike_James
Ultimate Cover User
5 months ago

Hi frenchery , my suggestion, hoping I understand your issue correctly.

 

At year end, from what you have written, it sounds like you will have a balance in AUD remaining on the bank account (EURO expressed in AUD), but no amount remaining in the actual EURO bank account at the same date. In that case you can record a spend money (to clear a loss) or receive money (to clear a gain), to clear out the remaining AUD amount, and allocate it to an account called "currency variance" in the profit report, either under income or cost of sales. 

 

If for example you did have a EURO balance remaining, then you would need to calculate its equivalent in AUD at that date, using bank rates, and the spend/receive money amount would be for the difference between that AUD equivalent and what is in MYOB.

  • frenchery's avatar
    frenchery
    Contributing User
    5 months ago

    Hi Mike,


    Thank you for taking the time to provide some valuable feedback.

    Apologies if my questions below seems a bit trivial but my accounting knowledge is quite basic. I am writing on this forum because I am not able to get help from my accountant on this matter. 

     

    Your initial statement is correct:
    - My actual EUR account has a balance of 0 EUR today

    - My MYOB EUR account (EUR expressed in AUD) has a positive balance today

     

    If I understand correctly, you suggest I record a "receive money" to clear my gain (in my specific case today). I shall assign that amount to a different chart of account called "currency variance".

    • I do not have such account, shall I create it under the parent header "Bank account" where my EUR bank account sits ?
    • If I assign this amount to that new account, how can I then reconcile my EUR bank account ?
    • In last year annual tax return, I can see a line called "Unrealised losses on revaluation of assets to fair value" corresponding to "Foreign currency losses". I do not know how this number has been calculated.

     

    Thanks in advance for your time and guidance on this matter.

    • Mike_James's avatar
      Mike_James
      Ultimate Cover User
      5 months ago

      Hi frenchery , if your MYOB bank account has a positive value at end of year, then you should record a spend money at that date. This will reduce that balance to zero. Allocating that spend to a currency variance account will show that reduction as a loss, which is a realised loss, ie actual and permanent.

      The currency variance account is usually set up in your income or cost of sales section, definitely not adjacent to your bank.

      The unrealised losses figure will have been calculated by comparing the value in AUD of any foreign currency assets/liabilities, using exchange rates at that date, with the MYOB book value at the same date. 

      Reconciling your EUR account in MYOB is tricky because in MYOB it is only in AUD. You may need to keep a separate analysis so that you can see a running balance in both currencies.

       

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