Being self employed as a sofware developer (as a NZ Ltd Company) I've been doing my own accounts so far, been perfectly fine, but recently started invoiving an Aussie company in AUD for development services I perform for them.
Not 100% sure on the ways of accounting for foreign currency.
The main question is how do I calculate gains/losses on foreign currency (for the income statement).
Take this simple example:
1. On 1 Jan 2011 I invoice Aussie Co $100 AUD, rate = 1.2, = $120 NZD (recorded as income).
2. On 31 Jan 2011 Assue Co pay $100 AUD (bank takes $10 AUD as TT fee) into my foreign currency bank account (in NZ).
On this date, rate has increased to 1.25
So I record a $10 AUD bank fee under expenses at 1.25, = $12.50 NZD
And I record a $100 AUD payment from customer at 1.25, = $125.00 NZD
Foreign Currency Bank Balance: $90.00 AUD
Now at this point what do I record as a foreign currency gain? $5 NZD?
3. On 15 Feb 2011 I transfer the $90 AUD from the foreign currency bank account, into my $NZD standard business account, and rate has increased again to 1.30
So $90 AUD = $117 NZD.
At this point what do I do? Originally the $90 AUD was worth $112.50 NZD on 31 Jan (rate 1.25).
And now its worth $4.50 NZD more.
Does this go into realised foreign currency gain?
At this stage I am trying to stay away from using systems such as Zero and MYOB, because everything has worked so far, and I have built my own PHP + MySQL simple accounting system which generates my invoices, etc.
Any tips? (other than moving to Xero, or going to an accountant - which I have to do if I can't figure this out)