Fluctuating Exchange Rate

[Dirty Dick]

Hello Everyone
I am preparing a workbook for a friend who rents out his Spanis
apartment. I have divided it up into 2 sections, income an
expenditure. The income is in Pounds Sterling, but the expenditure i
in Euros. I want to be able to calculate a "profit" figure by takin
the expenditure from the income, so I have a cell on the expenditur
sheet called "Exchange Rate" (Euros/Pound). However as the exchang
rate fluctuates like a roller coaster over the year, every time
change the figure, the final Profit Margin also changes even though i
was correct at the time of entering. Is there any way I can overcom
this problem?
Thank

 

[CWatters]

Hello Everyone
I am preparing a workbook for a friend who rents out his Spanish
apartment. I have divided it up into 2 sections, income and
expenditure. The income is in Pounds Sterling, but the expenditure is
in Euros. I want to be able to calculate a "profit" figure by taking
the expenditure from the income, so I have a cell on the expenditure
sheet called "Exchange Rate" (Euros/Pound). However as the exchange
rate fluctuates like a roller coaster over the year, every time I
change the figure, the final Profit Margin also changes even though it
was correct at the time of entering. Is there any way I can overcome
this problem?
Thanks

Yes but you may not like the answer..

You need to know when exactly your friend actually converts his expenditure
back to GBP? For example are his items of expenditure immediately converted
back to GBP as they are incurred (eg perhaps they are charged to a UK credit
card) or does he maintain a Euro bank account from which all expenditure is
paid and which is "topped-up" annually by a transfer from a GB account?

If all items of expenditure are immediately converted back to GBP the answer
is to record the exchange rate alongside each transaction . For example set
up column headings like this...

Expend (in Euro) Exchange Rate Expend (in GBP)

... and total up the "Expend in GBP" column. Deduct that from the Income to
get the profit.

If he uses a Euro bank account then you total up the "Expend (in Euro)"
column and only convert it to GB when he actually tops up the account.

Note that the UK taxman usually requires you to record the exchange rate at
the time of each transaction. For example when buying and selling a house
abroad he should use the rate at the time of the buy to calculate the
purchase price in GBP and then the new rate at the time of the sale to
calculate the sale price in GBP. Subtact the two to get the profit in GBP
for CGT..

In some case it's not possible to use the exchange rate at the time of the
transaction - in this case I believe the UK tax man will allow you to use an
average exchange rate but seek advice before you rely on this.

Colin

 

[AlfD]

Hi!

Failing that, you could try to persuade the UK government to join th
Euro-zone.

Al