A foreign-currency settlement difference needs a bridge between the invoice’s recorded amount and the payment’s recorded amount. Match the same currency obligation first, then separate exchange movements, bank fees and any remaining balance. A different Singapore-dollar debit does not automatically mean the supplier was overpaid.
Identify the original obligation
Record the invoice currency, amount, invoice date and amount recorded in the company’s reporting currency. Retain the original exchange-rate basis used in the books. Do not overwrite the invoice entry with the payment-date rate simply to remove the apparent difference.
Check whether a credit note, deposit or earlier payment changes the amount still payable. If several invoices were settled together, prepare an allocation before calculating the difference. Otherwise, an allocation problem can be mistaken for an exchange movement.
Separate payment components
Obtain the bank advice showing the currency sent, conversion information and charges. Distinguish a fee charged to the company from an amount withheld from the supplier’s receipt. Ask the supplier about any outstanding balance using the invoice reference and actual remittance details.
Example: the foreign amount is fully settled
A foreign-currency invoice is paid in full in its original currency, but the Singapore-dollar value of the payment differs from the amount first recorded. The accountant should review the exchange difference and any fees. Do not leave the difference as an unexplained supplier balance merely because the original Singapore-dollar figure was different.
Prepare the accountant’s bridge
Show the original ledger amount, any intervening adjustments, settlement amount and separately identified fees. Include dates and document references. Ask the accountant about the applicable accounting treatment, including any earlier remeasurement, rather than applying a universal exchange-rate shortcut.
Keep GST review distinct
This settlement reconciliation does not replace a GST review of the invoice. Invoice requirements and claim conditions must be checked separately where relevant. Retain the invoice, bank advice and approved accounting entries together so the transaction can be explained later.
Related practical guidance
For the surrounding records and responsibilities, see bookkeeping basics, company records to keep, bookkeeping and accounting.
Official guidance: IRAS official guidance.
Help with your company records
For accounting, bookkeeping and related compliance support, contact Raffles Corporate Services at [email protected] or WhatsApp +65 8501 7133. Tell us which records or process need attention so we can discuss the relevant next steps.
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