Foreign currency profit and loss sole proprietor

Poncke

Hi all,

I have been searching the internet but cant find an answer to my first question.

I am a photographer and selling licences for my images and I am selling Print on Demand items.

I have income in Euros and US Dollars and I have cost in Euros, US Dollars and GB Pounds. How do I go about this on my balance sheet? Do I convert the dollars to euros, if so what conversion should I use? If not, do I need to make separate balance sheets for Dollars and Euros.

Second question is related to reporting tax to revenue. Basically I started my photography business February 2012, it was really only a hobby at that point, but my first ever income was July 2012. I know the fiscal year ends in October, but I only realized around December I'm actually a sole trader and had to report my earnings from photography. Am I 7 months late? I haven't registered the business with revenue yet and I am now preparing all papers to do just that, and I am working on my balance sheet.

I am also fully employed, I just make some money on the side with my photos. I want to report it, as things are really starting to look like a business now.

Thank you for your time in answering, if you need more info, let me know.

Cheers
Ronald

If you are interested, I sell fine art here www.semmickphoto.com and stock images here http://www.shutterstock.com/g/semmickphoto

srsly78

This is the kind of thing you ask your accountant. Sort that out quick before you get hit with loads of fines for doing it wrong.

Poncke

I dont have an accountant, I am looking into all aspects of being a sole trader at the moment. I was hoping someone could answer some questions. I will look for an accountant now.

Poncke

Does anyone know if this accountant is reputable? http://www.mytax.ie/contact-us/becoming-a-client/

srsly78

Just make sure they are qualified and that they don't charge you too much. e500 is the most you should pay annually as a sole trader. Accountant will help you prepare returns, and will be able to give advice as needed.

mkdon05

srsly78 wrote: »

Just make sure they are qualified and that they don't charge you too much. e500 is the most you should pay annually as a sole trader. Accountant will help you prepare returns, and will be able to give advice as needed.

You don't know what volume he is talking about or his range of income, so how can you say don't pay anymore than €500? He is also dealing in foreign currencies that may require hedging or contracts with the banks for forward rates. All time consuming and requiring a knowledge of what to do.

Poncke

Thanks, 500 euros per year. I dont even make that much, LOL, well I do, but thats 20% of my income.

I will check it out.

Peterdalkey

Just record everything in Euros at the actual figure you receive the nett payment into your bank. Real simple really.
As you only traded in 2012 for the first time, your first return/payment is only due in 2013, no issue so!

Poncke

Peterdalkey wrote: »

Just record everything in Euros at the actual figure you receive the nett payment into your bank. Real simple really.
As you only traded in 2012 for the first time, your first return/payment is only due in 2013, no issue so!

Well, thank you, you just solved all my issues in one simple answer.

mkdon05

Peterdalkey wrote: »

Just record everything in Euros at the actual figure you receive the nett payment into your bank. Real simple really.
As you only traded in 2012 for the first time, your first return/payment is only due in 2013, no issue so!

Foreign currency risk is an issue here, granted at the figures op has mentioned its not a big issue, but if there is growth in the business he is open to currency losses turning, what would have been a profit at date of sale, into a loss on receipt of payment.

So op while you got a simple answer to your question, it doesn't mean its the best solution for your business. Talk to an accountant.

Peterdalkey

mkdon05 wrote: »

Foreign currency risk is an issue here, granted at the figures op has mentioned its not a big issue, but if there is growth in the business he is open to currency losses turning, what would have been a profit at date of sale, into a loss on receipt of payment.

So op while you got a simple answer to your question, it doesn't mean its the best solution for your business. Talk to an accountant.

There is no accountant still outside gaol that can change the value of actual cash received at bank! If you are trying to explain currency hedging, read the book first.

mkdon05

It becomes about what you are doing with the actual cash received, or what you have done before that date to minimise risk

Take a 90 day creditor situation.

1. Take out a dollar loan on date of invoice taking into account borrowing rates in the US
2.Lodge that into a euro deposit account with a similar rate

3.After 3 months you guarded yourself against a dip in foreign currency rates.

I think its you that need to refer to a book my friend.

Poncke

I'm just selling image licences through an agency and get paid royalties in Dollars, pay out once a month, into my PayPal account and then withdraw in Euros to my bank account.

mkdon05

yes as I said ealier, what Peterdalkey said above is fine to do, but if you were talking about large amounts of money, it would not be the best way to deal with foreign currency.

Peterdalkey

And of course your dollar costs self- hedge your dollar revenues. Really glad you are not extending 90 days credit terms, as a buyer of stock images, I did not imagine you would be!

mkdon05

Fair point on the dollar self hedging. On the Credit terms side of things, agreements are not always adhered to!

Peterdalkey

mkdon05 wrote: »

Fair point on the dollar self hedging. On the Credit terms side of things, agreements are not always adhered to!

The whole hedging issue is in fact a red herring in relation to the advice sought by the OP as to how to treat foreign currency receipts in his accounts, and report to Revenue.
However answers to unasked questions and advice not sought are often a feature of topics on here

smeharg

I can't believe people are actually having a discussion about foreign currency hedging for a sole trader selling online. The sales are in real time: sale made; cash received. The currency risk here is that you don't keep the rates up to date, not adverse movements between invoice date and payment. To bring currency hedging into the mix is just ridiculous!

It's as simple as peterdalkey said. Record the sale at the rate it hits your bank and you can't go far wrong. There may be a little bit more involved if you've foreign cash balances at the year end, but nothing too serious.

If you started trading in 2012 you need to file a tax return for the period from when you started up to 31 December 2012. You can either base this on actual figures, ie prepare accounts up to that date; or you can prepare accounts for 1 year and apportion accordingly.

The return would normally be due on 31 October 2013, but as it's your first year of trading you have until 31 October 2014. I'd generally recommend filing early, though.