International Transactions (Multicurrency)

Background
Setting up Multicurrency
Notes on Using Multicurrency
Currency Gains/Losses

Transfers

Inventory
Revenue (Income), Expenses, Cost of Sales
Multicurrency (International) Transactions

Background

You can set up foreign bank accounts including checking accounts that can be used to record transactions in a foreign currency. These foreign accounts can also be reconciled.

To use the AccountEdge Pro international transactions (multi-currency) feature, you'll need to enable the feature, and create and link the foreign currency accounts, which you'll need to have created. Additional criteria are:

  • Once multicurrency is enabled and transactions are entered, it cannot be disabled
  • Once transactions are recorded without setting up multi-currency, all transactions for referenced customers, vendors and salespeople will be set up to use the local currency
    • If a different currency should be used for these individuals, users will need to create a new customer, vendor or employee cards, respectively. This is necessary to ensure that historical amounts for these individuals aren't misstated.
    • Card File cards (Customer, Vendor, etc.) will be available for other transactions

Setting up Multicurrency

Step 1: Turn on the multi-currency preference

  • Select Setup from the menu bar at the top of the screen
  • Select Preferences from the drop down menu
  • Select the System tab
  • Check mark "I Deal in Multiple Currencies"

Step 2: Create the Currency List

  • Click Lists from the menu bar at the top of the screen
  • Select Currencies from the drop down menu
  • Click the arrow to the left of currencies you need to update (you can change the names of unused entries)
  • Click New to create new currency entries

Step 3: Administer Exchange Rates

  • Determine the correct Exchange Rates
  • Indicate the Exchange Rate for each applicable currency in the list

Leave the Currency List window open, you'll use it in Step 5.

Step 4: Create accounts to track foreign currency transactions

For each foreign currency account you create, AccountEdge Pro will create an exchange account. The value in the exchange account will be the difference between the value in the foreign account, and the value in your local currency.

  • Click Lists from the menu bar at the top of the screen
  • Click Accounts from the drop down menu
  • Create the account
    • Click the New button to create an account
    • Enter an account number and name (AccountEdge Pro by default, will create an exchange account with a number that is one greater than the number you indicate here; but you can change that number)
    • Click the Details tab
    • Indicate the Currency Code; AccountEdge Pro will create the exchange account
    • Click the Profile tab and enter an Opening Balance if necessary; AccountEdge Pro will place an exchange value in the exchange account, since you already indicated an exchange rate
  • For Sales, create
    • An asset account for tracking receivables
    • Asset Bank account for receipts and disbursements in the foreign currency (optional, if applicable)
    • Liability account for deposits you receive on Orders
  • For Purchases, create
    • A liability account for tracking payables
    • An asset account for Deposits paid (deposits you pay)
    • A liability account for import duties collected
  • Currency Gain/Loss—Consult with your accounting professional

Step 5: Link Accounts—Link the foreign currency accounts to the Receivables and Payables accounts, for each currency in the Currency List.
Step 6: Link Currency to Customers and Vendors—On each customer and vendor card, indicate the appropriate currency.
Step 7: Historical Transactions—You can enter Historical Transactions for your international customers and vendors. See the Historical Purchases / Sales FAQ for details.

TIP: You can create a foreign currency header account, and group your foreign currency accounts under this header. The header value will show the value of its sub-accounts in the local currency.

Notes on Using Multicurrency

  • After setting up the multi-currency feature, you can enter transactions in Sales, Purchases, and Banking. In each case, you will use the exchange rate you indicated in the Currency List. This default can be over-written when you create a transaction, however.
  • To change the exchange rate on an individual sale or purchase transaction, edit the transaction and click on the foreign currency rate icon and change the exchange rate. (The transaction must be in the current fiscal year.)
  • Postings to Income, Cost of Sales and Expense accounts are recorded in local currency
  • Only one currency can be associated with a customer or vendor card
  • When you select the preference "I Deal in Multiple Currencies", a Currency Gain/Loss account is automatically created as an Income account, and linked in Setup > Linked Accounts > Accounts & Banking Linked Accounts.
  • You can receive payments for foreign-currency sales to a foreign-currency bank account, or to your local-currency bank account (see below).
  • You can pay the bills of foreign-currency purchases from a foreign-currency bank account, or from your local-currency bank account (see below).
  • The Bank Register window displays only your Local-currency Bank accounts. Use the Bank Register Report to view your foreign-currency bank accounts.
  • The Group with Undeposited Funds feature is not available for foreign bank accounts

Currency Gains / Losses

Whenever you have a foreign bank account, changes in the currency exchange rates between that country and your home country can cause the value of your foreign currency to fluctuate.

  • A currency gain can occur when your local currency weakens, relative to the foreign currency, causing the value of your foreign account to increase.
  • A currency loss can occur when your local currency strengthens, relative to the foreign currency, causing the value of your foreign account to decrease.

Realized Gain / Losses

  • When payment is received to a local-currency bank account for a foreign-currency sale, the gain or loss is considered realized.
  • When a payment from a local-currency bank account is made on a bill of a foreign-currency purchase, the gain or loss is considered realized.
  • At the time a currency gain or loss is realized, an automatic posting is made to the Currency Gain/Loss account and to the linked exchange account. The Currency Gain/Loss report lists the currency gains and losses that have been automatically posted through sales and purchases during the month.

Unrealized Currency Gains / Losses

  • An unrealized gain or loss is a potential gain or loss at any point in time between the recorded sale or purchase and the receipt of payment. No automatic postings are made to track unrealized gains or losses. Not all businesses need to track unrealized gains or losses. The Unrealized Gain/Loss report lists the gain or loss on each foreign currency account. You can use this information to make adjustments for your balance sheet and profit and loss accounts.
  • Receipts and disbursements recorded in foreign-currency bank accounts are Unrealized Gain / Losses.
  • Gain or Losses in the value of a foreign account are considered unrealized while the money is still sitting in the foreign account.

Transfers

  • Currency gains and losses that occur through the transfer of funds need to be recorded in a general journal entry.
  • At the end of a period, you can look at the value of your foreign accounts and use the Currency Calculator to calculate their true values in local currency. You can then create a journal entry where losses are posted as credits to the exchange account with a corresponding debit to your Currency Gain/Loss account. Gains are posted as debits with a corresponding credit to your Currency Gain/Loss account.

Transfer Funds from a Local to a Foreign Account

To transfer funds from a local-currency account to a foreign-currency account

  1. Open a Spend Money transaction window in the Banking Command Center.
  2. Click the Currency button, and select the currency code of the account to which the transfer is being made (entries will be noted in the foreign currency).
  3. Click OK.
  4. In the Pay from Account field, enter the local-currency bank account from which the money is being withdrawn.
  5. Enter the date, amount, payee, and memo. In the Account # (or Name) column, select the foreign-currency account to be deposited.
  6. Click Record.

Transfer Funds from a Foreign to a Local Account

  1. Open the Record Journal Entry window in the Accounts Command Center.
  2. Click the Currency button and select the foreign currency (entries will be noted in the foreign currency).
  3. Select the local-currency account.
  4. Indicate the foreign-currency amount in the Debit field.
  5. Indicate the foreign-currency account on the next line.
  6. Indicate the foreign-currency amount in the Credit field.
  7. (Optionally) You can enter your Gain / Loss: losses are posted as credits to the exchange account with a corresponding debit to your Currency Gain/Loss account. Gains are posted as debits with a corresponding credit to your Currency Gain/Loss account.
  8. Click Record.

Receive Foreign Currency to a Local-currency Bank Account

  1. Go to the Sales command center and click Receive Payments.
  2. Select the customer.
  3. Choose the local-currency account in the Deposit to Account field.
  4. Click the Rate button to check the default currency rate. Change the rate if needed, then enter the amount to be Allocated.
  5. Click Record.

Inventory

The value of inventory is always in the local currency. Only local currency accounts are available as the linked accounts for I Buy, I Sell, and I Inventory. Therefore, the Item History, Last Cost, Average Cost, Current Value of an Inventoried Item and Selling Price will all be valued in the local currency. You can create a customer card with a foreign currency and sell items and services to them, and you can create vendors with a foreign currency and buy inventory and services from them, however in both cases, the foreign currency amount and the exchange amount are tied to the sale/purchase journal transaction but the value of the item is only reported in local currency.

Revenue (Income), Expenses, Cost of Sales

When using the multi-currency transactions feature, postings to the income, expense and cost of sales accounts will be made in the currency indicated on the associated customer or vendor card. AccountEdge Pro will automatically create adjustment postings based on the related exchange rate. As a result, the amounts in these P&L accounts will be (your) local currency amounts.


Multi-currency (International) Transactions

AccountEdge will not go back and revalue transactions automatically. Any transaction you record will use the rate at the time your recorded it. You can, however, edit transactions individually to update them to the current exchange rate, if you wish.

We recommend that you update your currency list at the beginning of the month with the rate that you think you will be using. All of your transactions will be recorded using that rate. If there are exceptions, then you can handle them on a transaction-by-transaction basis.

Also see: Transaction Exchange Rates

Cards

A customer's or vendor's currency is indicated on the Profile of a customer or vendor card. Once transactions are posted referencing a customer or vendor card, the currency cannot be changed.

Sales and Purchases

Customer and vendor transactions are indicated in the customer's or vendor's currency. The monetary amount indicated on Sales should be shown in the customer's currency. The monetary amount indicated on Purchases should be shown in the vendor's currency. AccountEdge Pro will automatically make the necessary adjustments to localize the monetary amounts to your local currency. AccountEdge Pro will use the exchange rates indicated in the Currencies List (Lists > Currencies) to make the adjustments. You can change the exchange rate on the transaction by clicking on the Currency button and entering a different exchange rate.

Disbursements and Receipts

You can create operating bank accounts in your chart of accounts to represent actual foreign-currency bank accounts. You can receive customer payments to, and make vendor payments from these accounts. Alternatively, you can receive customer payments to, and make vendor payments from your local-currency bank account. In the former case, AccountEdge Pro will post the foreign-currency amount to the foreign-currency account, and the exchange difference to the foreign-currency account's exchange account. As a result, the foreign-currency account will reflect the value of the foreign-currency bank account, and the sum of the foreign-currency account, and its exchange account, will reflect the value in your local currency.

In the latter case, when you receive foreign-currency payments to, and make foreign-currency payments from your local-currency account, AccountEdge Pro will create adjustment postings, accounting for the exchange difference. The result will be an accurate local-currency value in your local-currency bank account.

Receive and Spend Money

Receive and Spend Money transactions are made in the currency indicated in the transaction window. Foreign-currency Card File entries are available only when their currency is selected in the Spend or Receive Money transaction window. AccountEdge Pro will make the appropriate exchange rate adjustments as indicted above.

Transaction Gain/Loss

Invoices and Bills may have been recorded with different exchange rates than the ones indicated in the Currencies List. If this is the case, when payments are received or applied on invoices or bills respectively, AccountEdge Pro will show a Gain/Loss value on the payment window. This is the difference between the invoice or bill recorded exchange value, and the current exchange-rate value. AccountEdge Pro will post this diference to a Currency Gain/Loss account. This account is identified (linked) in the Accounts and Banking Linked Accounts (Setup > Linked Accounts > Accounts and Banking Accounts > Account for Currency Gains/Losses).

The exchange rates, and resultant journal entries, can be updated by clicking on the Currency button and entering a new exchange rate.