UK branch account

[stapler]

I work for an organisation that has 2 companies. One of the companies, company A, operates in UK and in Republic of Ireland. So I have set up two companies on our accounts system - one GBP and the other Euros.

Company B sometimes buys from French suppliers so it pays them in euros. So company B pays company A in GBP, and then company A sends payment to the French company in euros. That is fine, but Company A ends up with a credit balance in its UK company and a debit balance in the Irish company. They net off to zero initially, but then when the exchange rate changes there is a difference. Also this balance continues to grow as more payments are made.

Is there a way that these two accounts in company A can be cleared?

 

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Send out a "Sales Contra Invoice" to Company B as the direct cost are incurred month on month. I am made to believe that company B is operating to make profit therefore make the foreign exchange differences, direct cost of the sales to their clients.

Except you had a proposed budget by your clients prior starting the jobcosting. Thereby you should bear the burden of the differences otherwise have a budget slack or padding for each job embarked upon during the financial year to makeup the foreign exchange differences. This is transferring the cost burden to you clients

You would also need to sort out the accounting period in the software package used as of now, the foreign exchange differences have been ledger & bank reconciled. You pull out the invoices from company A sent from the french supplier and make journal entries of each difference and using the appropriate terms of journal entries.