Canada Journals involved in this transaction?

[Frida_The_Dog]

Hello!

Suppose "My Firm" receives 100K USD in its bank account from "Outsider", where 5K are revenues, and the remanent 95K are to be transferred to an exchange.

Basically, "My Firm" provides a service that it receives USD and converts them into another currency, earning a little % on the service conversion, that is to sit in the bank account.

I have some doubts about the journals:
"My Firm"
Bank account(asset)........ 100K DR
??? (asset)......................................100K CR

Bank account(asset)........ 95K CR
Exchange(asset)......................................95K DR

Bank account (asset)........ 5K DR
Revenue (Income)......................................5K DR

I don't think the above is right because the 5K are supposed to remain in the bank account

What confuses me is how to record the revenue separately, since the bank account should remain with 5K.

 

[DrStrangeLove]

I'm assuming you're using USD as your functional and reporting currency here. And to make this easier to follow, I'm going to assume you're converting the customer's USD into EUR; the process is the same with any other currency.

When you get the original funds, no services have been rendered yet. So there's no revenue yet. You have a liability (Customer Account - Outsider) that holds the value of the customer's deposit in USD.

To record receipt of customer funds in USD:
DR Cash ......................................................... 100,000
CR Customer Account - Outsider ............... 100,000

When you exchange the funds, thus rendering the service, you book both the change in assets and the revenue for the service.

To record conversion of USD into EUR for the customer:
DR Foreign Currency - EUR ........................... 95,000
CR Cash ........................................................... 95,000

To book the revenue earned for exchanging currencies:
DR Customer Account - Outsider ................. 5,000
CR Revenue - FX Services ............................... 5,000

And when the customer withdraws the EUR from its account, it's a straightforward entry.

To record the customer's withdrawal of funds in EUR:
DR Customer Account - Outsider ................. 95,000
CR Foreign Currency - EUR ............................ 95,000

When you net all the transactions together, you're left with the following:
DR Cash .................................... 5,000
CR Revenue - FX Services ....... 5,000

 

[Frida_The_Dog]

I'm assuming you're using USD as your functional and reporting currency here. And to make this easier to follow, I'm going to assume you're converting the customer's USD into EUR; the process is the same with any other currency.

When you get the original funds, no services have been rendered yet. So there's no revenue yet. You have a liability (Customer Account - Outsider) that holds the value of the customer's deposit in USD.

To record receipt of customer funds in USD:
DR Cash ......................................................... 100,000
CR Customer Account - Outsider ............... 100,000

When you exchange the funds, thus rendering the service, you book both the change in assets and the revenue for the service.

To record conversion of USD into EUR for the customer:
DR Foreign Currency - EUR ........................... 95,000
CR Cash ........................................................... 95,000

To book the revenue earned for exchanging currencies:
DR Customer Account - Outsider ................. 5,000
CR Revenue - FX Services ............................... 5,000

And when the customer withdraws the EUR from its account, it's a straightforward entry.

To record the customer's withdrawal of funds in EUR:
DR Customer Account - Outsider ................. 95,000
CR Foreign Currency - EUR ............................ 95,000

When you net all the transactions together, you're left with the following:
DR Cash .................................... 5,000
CR Revenue - FX Services ....... 5,000

Thanks, this makes sense!