Foreign currency accounting



I have taken over a client who trades in several countries and is paid
in £s, $s and Euro. and who has not yet prepared a first set of
accounts. The books show a mixture of currencies so that the T/B is
in different denominations. In order to prepare accounts in £s I
proposed that the net conversion figure required to bring everything
into £s be charged to the P&L. Future transactions (income & costs)
be converted as incurred. Currency debtors be maintained in currency
by spreadsheet in order to control credit but left in currency in the
T/B. Transfers between banks of different denominations be converted
to £s and differences charged to P&L as arising.

My client argues that this would result in large write offs in £ P&L
and distort trading figures. I have to agree but the alternative is
to create a balance sheet account just to balance the £s T/B and this
would also result in unrealistic balance sheet items.

Does anyone have a more rational method that would stand up to the
"realism test" ?


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