Questions & AnswersHow Do I Do Business Accounting Online For Mult-Currency PayPal Transactions?
Eoin asked 8 years ago

Q: How Do I Do Business Accounting Online For Mult-Currency PayPal Transactions?

Here’s a bit of a complicated one for me. My objective is to record the full expense of EUR to USD transactions.
Let’s say my business received an invoice to pay for USD$100.
We paid that bill from our PayPal account. But at the time, we only had $25 balance in our PayPal account.
So what PayPal does is charge our Irish debit card for the Euro equivalent of $75. The market rate that day was €55, but we paid PayPal €60.
They then convert those €60 they’ve received into USD at a premium exchange rate, and finally use that to pay the balance of the $100 bill.
What do you think about using the following setup of accounts in Bullet to account for this?

  1. Create a “PayPal USD” bank account in Bullet
  2. Create a “PayPal EUR” bank account in Bullet
  3. Record the €60 as a bank transfer from our normal current account to “PayPal EUR”
  4. Record a $75 bill from “PayPal USD”
  5. Mark that bill as paid with the €60 from “PayPal EUR” (thus allowing Bullet to calculate the exchange rate expense to our business)
  6. Record a $100 bill from the external service provider
  7. Mark that bill as paid from “PayPal USD”

That doesn’t sound right, though, since it’s recording the expense twice – one for the $75 currency exchange, and the other for the actual $100 bill.
How would you suggest handling this transaction in Bullet?
(Our approach so far has been to have a “PayPal” account in Bullet denominated in Euro. Any charge to our bank’s debit card is recorded as a EUR transfer from our normal back account to “PayPal”. Any bill paid through PayPal in USD uses the default exchange rate for that day. However, I think that’s missing the cost to our business that PayPal includes in its EUR to USD exchange rate.)
Thanks!

Eoin replied 8 years ago

One approach I can think of is calculating the exchange rate fee that PayPal has charged us, and add that as an additional bill in Bullet.

PayPal advertise that their EUR -> USD fee is 3%. I could use that to calculate how much they charged as part of the €60, and record that as an expense.

What do you think?

0 Answers
Peter Connor Staff answered 8 years ago

Hi Eoin, 

We’ve launched multi currency, this would be the best way to handle it, but we’re not accountants so you should really ask your accountant for advice. 
 
Possible Solution

  1. Create a “PayPal USD” bank account in Bullet – opening balance $25
  2. Record a $100 bill from the external service provider
  3. Mark that bill as paid from “Paypal USD” – so balance of Paypal USD should be -$75
  4. Record the €60 as a bank transfer from our normal current account to “PayPal USD” – so the balance of Paypal USD should now be $0.
  5. Record another bill for the fee amount 
  6. Mark that bill as paid from normal euro account

Cheers

Pete

Eoin replied 8 years ago

Very nice to see the bank transfer recording accounting for USD “Received in Bank”.

Peter Connor Staff replied 8 years ago

Cool – That multi currency function took nearly 6mts to build. You wouldn’t believe the craziness that happens in the bank-end, but it keeps it simple for you guys and that what we think will make us stand out.

Thanks Eoin.

Pete