Some simple bookkeeping queries

[saintashi]

My wife began a small craft business in late 2013, turnover is under €1,000 per annum. I'm preparing the accounts to make her returns and am just wondering about a couple of things.
Many of her purchases are in sterling, and so far they have all been paid by credit card/paypal on the day of purchase.
My instinct is to records the purchases in Euro converted using the published Central Bank FX rates, record the actual Euro payment amount in the Credit Card/Paypal ledger, and record any discrepency in an FX adjustment account. Alternatively, I could just use the actual rate charged for transaction, and dispense of the need for any adjustment account. This seems wrong to me though as if, in the future, payment wasn't made on date of invoice, there definitely would be adjustments required. It would also mean applying two different rates on the same day as different vendors charged different rates.

So am I right to use the Central bank rates with the relevant adjustments?

The other question I have is concerning VAT - obviously she is not VAT registered, so is there any need to record the VAT my wife paid on her purchases separately, or is it okay to just use the gross amounts she paid? She wouldn't ever expect to be registering for VAT so it seems simpler to ignore it.

 

[dublin66]

In my view it would be fine to take the amounts charged to the credit card or paypal account in Euro - if that is what happens as I'm not fully clear from your post. From a Revenue viewpoint provided you stick with a consistent method you should be fine. In any event with a turnover of less than €1K a year it won't have much impact how you treat the F/X transactions. As your wife isn't vat registered there is no point having a separate vat column - recording everything gross as the vat is irrelevant.

 

[saintashi]

Thanks dublin66, yes what happens now is she is charged in Euro on her credit card/Paypal. As you say it's not going to make much difference anyway, and I guess Revenue can't really argue with using the actual figures rather than estimated+corrected figures. I suppose the need to allow for fluctuations only really arises when there's delays between the invoice being raised and it being paid.

 

[cremeegg]

From a Tax point of view only the actual cost in Euro of the purchase is relevant. It makes no difference if there is a time difference between receipt of invoice and payment.

For example you receive an invoice on 1st of the month and convert it to Euro say €90, then you pay at 31st of the month and it costs you €93. The total cost is €93, wether you book this as cost of purchase €90 plus FX loss €3 or as cost of purchase €93 is irrelevant from a tax point of view.