Accounting for Multiple-Currency Sales

[tryubik-useonlyasdirected]

Using a double-entry system, how is a currency conversion and transfer recorded? Example: - 5 Items sell on eBay in USD - the USD Funds are deposited directly into a USD PayPal Account - USD eBay Fees are paid using those funds - the remaining funds are Converted & Transferred to a CAD PayPal Account Typical Entry based on the Example: - Sale Made: debit to ‘A/R USD’ and credit to ‘Income: Sales USD’ - Buyer Pays using PayPal: credit to ‘A/R USD’, debit to PayPal (USD) split with debit to ‘Expense: PayPal Fees USD’’ - eBay Monthly Fee: credit to ‘PayPal (USD)’ debit to ‘eBay Fees USD’ - Currency Conversion: credit to ‘PayPal (USD)’ then ??? and debit to PayPal (CAD) - Transfer: credit to PayPal (CAD) debit to ‘Bank Account (CAD)’

[recped]

There are of course a few ways to handle this situation.

One way is to ignore the currency difference and then make year end journal entries to account for the conversion using the monthly or annual average rates from the Bank Of Canada.

Another way is to completely ignore the PayPal account and only post withdrawals to your Canadian bank into your accounting system. At the end of the year again using journal entries you can account for the exchange and for expenses that have been paid out from PayPal and put any balance in the PayPal account into "cash on hand".

No doubt there are other methods as well. The important thing is to be consistent and to document your method so that should an audit ever happen you can show how you did your calculations.

The beauty (and maybe one of the problems) of accounting is that you can do things in many ways and still arrive at the same conclusion.

[femmefan1946]

Is this a posting ID? Or are you a newbie?

If you are selling more than garage sale levels, it could be well worth your while to have an accountant (or even a bookkeeper) set up your books to reflect your income.

But I agree that doing currency conversions once a year is a very sane move.

[tryubik-useonlyasdirected]

I realize this is months ago now but I would like to thank those in this thread for taking the time. A book-keeper was found (who has been much help) and the issue addressed.

For anyone else who may find this thread wondering what to do with multiple currencies:

a) Bookkeepers are life-savers

b) The method we use now is to use the annual rate as posted by the Bank of Canada. Each entry in our journals states the USD amount, then the Annual Exchange, the resultant CAD amount, and the Foreign Exchange Gain/Loss. So far, balanced.

I cannot stress Annual Rate enough (we first attempted to use the daily rates and it was a nightmare to double check at the end of the year for typo's).

[tyler@ebay]

Hi everyone,

Due to the length of time that has passed since this thread began I have locked it from future replies. If this is still an issue that warrants discussion, don't hesitate to begin a new thread!