You may have an overseas customer who wishes to be invoiced and pay in Euros and you only have a Sterling account.
When the customer pays you will get an advice from your bank, showing the Euro value, the Sterling equivalent and the bank charges.
- Enter the bank charges as a nominal payment in the cash book.
- Enter the Euro value on to the Customer Account at the rate of exchange invoiced. – see FAQ – How Do I Record a Supplier Invoice Payment in Foreign Currency? – the principle is exactly the same.
- Calculate the exchange difference (Sterling amount received + bank charges – Sterling amount posted to customer) and post this as a nominal payment or receipt to the exchange difference account.
When you process the bank reconciliation you will see three entries in the cash book relating to that one transaction.