Re: Double-entry for multi-currency trading software, Ronald.

Troy Steadman wrote:

Here's another double entry that cannot be done sensibly:

Can't it?

I pay 200 GBP into my solicitor's Client Account. He writes a check
for 100 GBP on his Office Account (for court fees say) and reimburses
himself from the Client Account.

What is the double entry on the Client Account?

This looks hairier than it really is, because two complications are
involved:

(1) That the client pays in advance.
(2) That the solicitor is presumably bound by rules which say client
funds need to be kept is a separate bank account from his own.

When you strip those complications away, you're left with a similar
scenario to that in which, say, a plumber invoices a customer for
materials and labour separately, where the materials are deemed
to have been bought by the customer straight from the supplier
without passing through the plumber's ownership, even though they
pass physically through his custody, as do the funds, i.e. he is
buying the boiler (or whatever) from the supplier as agent for the
customer. Heck, he may even charge the customer a handling fee in
lieu of what would otherwise be his mark-up. Anything to keep
VAT-able turnover down, eh?

Since the boiler doesn't pass through the plumber's ownership, it
doesn't pass through his P&L. If the plumber is foolish enough
to pay the supplier out of his own pocket, what he's really doing is
advancing money to the customer. So the entry for when he writes a
cheque to the boiler supplier is:

Cr £2000 Bank
Dr £2000 Customer

In due course he will charge the customer £1000 for his labour

Cr £1000 Services
Dr £1000 Customer

and require reimbursement of the outlay. Then the customer
settles his account.

Cr £3000 Customer
Dr £3000 Bank

So, translating this to the solicitor's scenario:

Client pays up front:

Cr £200 Client Troy
Dr £200 Bank Client

Solicitor pays court fee (which is really an advance to the client)

Dr £100 Client Troy
Cr £100 Bank Office

Solicitor transfers funds between his bank accounts

Cr £100 Bank Client
Dr £100 Bank Office

The solicitor might at this stage give you a "statement of account"
which lists the relevant transactions thus:

Cr £200 Advance received: Thank you
Dr £100 Disbursement: Court fees
Balance: £100Cr

.

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