CG78328 - Foreign currency: foreign currency bank accounts: aggregation of debits and credits: example for periods up to 5 April 2012

CG78327 describes an approach to computing gains and losses in connection with a foreign currency bank account where there are many transactions. This paragraph provides a worked example to illustrate that approach.

Consider an account denominated in US dollars to which TCGA92/S252(2) (sums representing currency acquired for personal expenditure) does not apply. The account is subject to many credit and debit entries in the course of a year. The monthly totals of credits and debits are as shown below. Also shown is the monthly average exchange rate for sterling to dollars.

- Total credits/$ Total debits/$ Avge exchange rate
April 7520 5000 0.504400
May 8100 6500 0.508768
June 7570 7575 0.508343
July 9230 6800 0.502694
August 6730 9250 0.528316
September 8210 5420 0.554933
October 7970 6400 0.589352
November 6990 7500 0.651597
December 15730 17650 0.672184
January 5580 4530 0.690832
February 7260 7240 0.692636
March 8340 7950 0.704384
TOTAL 99230 91815

The dollar (credit) balance at the start of April is $75,425 and the total allowable cost of the asset is 拢49,383.

The period of aggregation is one month. The computation begins with April. The results of computations are rounded to the nearest whole number before being used in further computations.

April gain/loss

Step 1: Add the total of the dollar credits in April to the opening balance:

$75,425 + $7,520 = $82,945

Step 2: Determine the expenditure allowable in respect of this by translating the April credits into sterling using the average exchange rate:

拢49,383 + (7,520 x 0.5044) = 拢53,176

Step 3: Determine the dollar balance carried forward by deducting the total of the debits in April:

$82,945 - $5,000 = $77,945

Step 4: Determine the allowable expenditure attributable to the debit amount using the A/(A+B) fraction applied to the total allowable expenditure as computed above:

5000/(5000+(75,425 + 7,520 - 5,000)) x 拢53,176 = 拢3,205

Step 5: Compute the gain or loss on the disposal:

Proceeds 拢2,522 (5,000 x 05044)

Allowable expenditure 拢3,205 see above

Loss 拢683

Step 6: Compute the allowable expenditure in respect of the $77,945 balance carried forward by deducting the expenditure allowed in this computation:

拢53,176 - 拢3,205 = 拢49,971

Repeat the process for each successive month, carrying the dollar balance and the remaining allowable expenditure forward to the next month:

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May gain/loss

Step 1 (Dollar balance before debits): $77,945 + $8,100 = $86,045

Step 2 (total allowable expenditure): 拢49,971 + (8,100x0.508768) = 拢54,092

Step 3 (Dollar balance carried forward): $86,045 - $6,500 = $79,545

Step 4 (apportion allowable exp.): 拢54,092 x 6,500/(6,500+77,945+8,100-6,500) = 拢4,086

Step 5 (compute gain or loss): (6,500 x 0.508768) - 拢4,086 = LOSS 拢779

Step 6 (allowable expenditure carried forward): 拢54,092 - 拢4,086 = 拢50,006

The results of the computations are shown in the following table:

- Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
- Dollar balance before debits. Total allowable expenditure Dollar balance carried forward Exp. re allowed disposal Gain or loss Allowable expenditure carried forward
April $82,945 拢53,176 $77,945 拢3,205 拢683 loss 拢49,971
May $86,045 拢54,092 $79,545 拢4,086 拢779 loss 拢50,006
June $87,115 拢53,854 $79,540 拢4,683 拢832 loss 拢49,171
July $88,770 拢53,811 $81,970 拢4,122 拢704 loss 拢49,689
August $88,700 拢53,245 $79,450 拢5,553 拢666 loss 拢47,692
September $87,660 拢52,248 $82,240 拢3,230 拢222 loss 拢49,018
October $90,210 拢53,715 $83,810 拢3,811 拢39 loss 拢49,904
November $90,800 拢54,459 $83,300 拢4,498 拢389 gain 拢49,961
December $99,030 拢60,534 $81,380 拢10,789 拢1,075 gain 拢49,745
January $86,960 拢53,600 $82,430 拢2,792 拢337 gain 拢50,808
February $89,690 拢55,837 $82,450 拢4,507 拢508 gain 拢51,329
March $90,790 拢57,205 $82,840 拢5,009 拢591 gain 拢52,196
TOTAL - - - - 拢1,025 loss -