Multiple currencies Inome/Expense query

[techie]

As reporting is done only in the home (native) currency, does this mean that any Income or Expense has to be designated in the native currency only, even if a transfer doesn’t actually happen?

For example if an entity's home currency is GBP and the same entity has a bank account in France in EUR. I understand that transactions will involve forex gains or losses. Suppose interest (an income) 10 EUR is received in this EUR bank account, how does this work?
Should the 'Interest Income' account be in GBP? In that case, when I receive an interest which is in EUR, I use some arbitrary exchange rate of that day such as 1 EUR = 0.9 GBP and show the profit as 9 GBP?
Or, do I create a new Income account with currency EUR and show the profit as 10 EUR?

[Ian J]

I'm a bit rusty on my accounting but I believe that it is normal practice to use the prevailing exchange rates to convert foreign currency accounts to sterling as at the date of the accounts

[DIY Accounting]

Foreign currency transactions converted to UK are entered at the actual UK cost
For transactions in foreign currency not immediately converted is influenced by the company policy on currencies.
You could enter all transactions converted to UK at the rates prevailing at the time. At the year end that might also involve you working out any foreign exchange gains or losses and also including that in the accounts.

Another choice would be to visit the HMRC website that publish exchange rates to use in the accounts. As these are only about every 6 months it isn;t that accurate but acceptable to HMRC

[FusionAccounts]

Originally Posted by DIY Accounting

...
Another choice would be to visit the HMRC website that publish exchange rates to use in the accounts. As these are only about every 6 months it isn;t that accurate but acceptable to HMRC

When you record your transactions you should record the Foreign currency amount and your business currency amount (GBP). I believe HMRC will accept either a rate published in a newspaper or other source or their own published rates.

Google - "hmrc Foreign currency transactions and VAT"

HMRC rates are published monthly with weekly updates. Google - hmrc exchange rates.

When accounting for Foreign Currency a new nominal account is generally used to account for currency fluctuations. So, for example, if you raise an invoice for 100 EUR = 80GBP but when the customer pays you 100 EUR = 50 GBP. Obviously when the customer pays you a 100 EUR then the 80GBP of debt has to be settled. The additional 30GBP is taken from the currency fluctuation account.

If you have a EUR bank account then as each transaction occurs you will need to record the GBP equivalent. At a point in time you can adjust the GBP equivalent according to the current exchange rate - again from the currency fluctuation nominal account.

A good accountancy package that deals with foreign currency - such as Fusion Accounts (Google "Fusion Accounts") will help you a lot.