Before my company made its first sales I paid for certain things from my personal account. I researched and found that I should use the "Owner's Investment" account on the expense and add it as a negative amount so I could pay myself back. So this is what I did:
- Paid for service in USD from my personal account
- Created expense with the USD amount - Added "Owner's Investment" of NEGATIVE of the same amount so the expense came to $0.00
- Created a new cheque and paid myself back in GBP (my home currency) for the exact GBP amount that left my account (using whatever exchange rate the bank/PayPal used at the time)
The problem now is that my "Owner's Investment" account is negative due to not receiving the true exchange rate at the time of purchase.
How can I reconcile this? Thank you in advance for your advice.
Thanks for the details, ollie6.
The Owner's Investment account will show as negative since the exchange rate will not affect right away. However, whe you reconcile the account, you'll have to do it separetly.
You'll have to reconcile the USD amount, and another reconciliaton for the GBP transactions.
When doing the reconciliation, you'll have to compare it with your bank statement.
I've also added these articles for more information when reconciling:
I'm just a post-away if you need help. Stay safe!
Thanks very much for your reply.
So how would I separately reconcile USD and GBP? The GBP has been reconciled as far as my bank statement is concerned - I have paid my personal account back from my business account and matched the cheque expenses to those transactions. Initially I had tried to create a separate Owner's Equity account specifically for USD but it would not let me change currency under the Equity category.
From what I understand, my negative GBP balance on my Owner's Equity account is due to the funds lost via the banks exchange rate because the USD expenses aren't using the true exchange rate for any given day. I thought about manually entering the exchange rate on the expense but there is not enough decimal places to enter the exchange rate used by PayPal so there is still discrepancies.
Any ideas how I can achieve this? I really appreciate the help!
Each currency should have a different account, Ollie6. This will help you reconcile them with ease.
Although, since you're unable to create an owner's equity using a different currency, I'd suggest reaching out to our customer care support so they can take a better look at this. They can provide you with a workaround that wouldn't affect your reporting and without discrepancies. Here's how:
Drop by if you have other concerns. We'd be pleased to hear from you again.