The Joel Train

We purchased Euro's for $1.18 a piece and wired them to our investment pool at another bank.  We did this because there was a pending transaction that we'd missed and we needed to fund immediately.  We couldn't wait for someone else to convert the currency, so we purchased it ourselves at a premium.

We converted the cash to Euros and wired them to a bank in France.  The bank took a 25 Euro fee just to process the wire.  Then, our investment bank recalculated the Euro's at their favorable conversion rate of $1.14.  In a mouse click we'd lost $1,800.  But I didn't know that yet.

So here I am a month later, pushing and pushing to get the journal entries out to our accounting group.  I keep slamming my head into this reconciling difference.  I run the numbers and check my formulas and I still end up with this maddening difference.  What was I doing wrong?

There is a balance to things in accounting.  Generally the loop closes itself.  You receive cash for your services, you record the receipt of cash and you also record the income generated for the services.  It's a balanced transaction.  You pay money for someone else's services, you record the outflow of cash, and you record the expense.

When we transfer cash in dollars from one place to another, the cash leaves at the same value it is received.  That makes me feel good.  Those numbers work.  But in this case the cash sent didn't match the cash received.  And it took me the better part of a frantic hour to figure that out.  Once I'd identified the source of the difference I had to allocate a portion to fees and a portion to the loss incurred when the currency was revalued.  I then had to inflate the amount received to include these adjustments so that the total amount tied to both the transfer out (Euro's purchased at a premium), and the adjusted transfer in (Euros revalued for less, plus the transfer fee).

I like these puzzles.  I don't like the pressure of solving them under a looming deadline.  The 6th working day of the month is a dark day.  I do not enjoy it.