Currency Charges

This Overheads code records the cost of currency charges incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Importer

An importer buying stock or components from overseas suppliers, invoiced in USD or EUR, pays a margin above the true wholesale exchange rate every time the bank converts sterling to settle a foreign invoice. Across a month of supplier payments that margin might total £190 — a debit of £190 to 7902 (Currency Charges) and a credit of £190 to 1200 (Bank Current Account), with no VAT line since currency conversion is a financial service outside the scope of VAT.

Exporter

An exporter selling overseas receives customer payments in foreign currency, which the bank converts to sterling on receipt — again at a rate that includes the bank's margin rather than the true mid-market rate. A month of export receipts might generate £260 of currency charges: a debit of £260 to 7902 and a credit of £260 to 1200. Because this cost scales with the volume of foreign trade rather than domestic turnover, it's one businesses shop around on — a dedicated FX provider or a foreign-currency account can shrink it noticeably compared with the bank's standard rate.

Commonly confused with

Because code 7901 (Bank Charges) sits right next to this one in Overheads, it's a common mis-posting target. Code 7902 is specifically for currency charges, while 7901 covers bank charges — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Currency Charges won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads