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 | 听 |
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:
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 | - |