(Kamloops, BC, Canada)
The company (corporation) is working with US and Canadian dollars.
It has two bank accounts (for USD and CAD), but also very often the owner takes cash from US dollars account to pay for the goods in USA with cash. My concern is about currency exchange rate. How should I record transactions from and to USD account?
I understand how to record transactions from USD to CAD bank accounts using Exchange Rate Account but whether I should record exchange rate loss and gain in CAD also every time when there are withdrawals and purchases with cash from USD accounts without involving CAD accounts.
And another question related to this. When the owner withdraws USD cash from USD bank account - should I have some "Cash USD" account in Charts Of Accounts or should it be an account - Loan to/from owner US dollars?
Thank you for your time.
These are good questions. I'll try to respond ... and hope I don't forget to mention something. If I do, I'll add another post ... or if you have any more questions afterwards ... or don't agree with what I'm saying, post back so we can discuss it.
I haven't dealt with foreign currency for a few years ... but here is my recollection.Should I record exchange rate loss and gain in CAD every time there are withdrawals and purchases with cash from USD accounts without involving CAD accounts?
Generally, every US transaction will need to be booked to the income statement at CAD.
You didn't mention the volume of transactions.If there are not very many transactions
, I would convert each entry at the time I am doing my data entry. If there was a large volume of transactions
, I would process any US deposits or US bill payments in the US bank account just like you would in your Canadian account, ensuring you have captured (tagged or identified in some
way) the US information booked. I would NOT book the currency valuation at this time.
Then at month end, I would pull out my US information captured (in a report perhaps ... or from your US bank account/statement) ... and book one journal entry at the monthly average conversion rate with the offsetting entry to Foreign Gains (Losses).
Again, depending on the size of the business, I may even decide to book this to Unrealized Foreign Gains (Losses) to reflect the fact that all the transactions were in US dollars and the journal entry is being done for period end reporting only.
I won't discuss how to do the physical transfer between the US and Canadian bank accounts because you have indicated that you already understand this.Month End / Year End
At period end, you will need to adjust/restate the US balance sheet accounts using the currency rate as at your reporting date ... again through another journal entry.When the owner withdraws USD cash from USD bank account - should I have some "Cash USD" account in Charts Of Accounts or should it be an account - Loan to/from owner US dollars?
Without more information, it's tough to answer this one. Reading between the lines, I think you are saying the cash was not withdrawn for business purposes but personal use.
Again, I would follow the same rules I discussed above ... dependent upon the volume of transactions. That way you wouldn't need a US account for the owner. You could just use the Canadian account.
How the Chart of Accounts is set up is often due to preference. If an accountant does your year-end reporting, their preferences should be taken into account ... to ensure your billing stays as low as possible ... i.e. the accountant is not having to rework the information to their preferences and needs.
I hope I've answered what you were asking. Like I said, post back if you don't understand anything I've said.