An in-depth look at QuickBooks Multi-Currency
functionality.
Session will emphasise how to understand
Multi- Currency reporting and how to avoid the
common pitfalls.
MultiCurrency Functionality
– This presentation will Cover:
• Brief Overview on the setting up of Multi Currency
• Cover Topics specific to Making adjustments, the setting
up, and the understanding of reports
• Rules for Multicurrency
• Balancing Sub Ledgers to Balance Sheet
• Wish list
• Q&A
MultiCurrency
• During the presentation we will be using a sample file,
“QuickBooks Multicurrency File”
• The presentation will cover Functionality of Multicurrency
rather than how to set up
• For this presentation we will be working with examples of
Foreign Currency Accounts Receivables in US$
• File & Notes will be available to download from Quicken
Website
Brief Overview on setting up for
MultiCurrency
• Multicurrency is only available from QuickBooks Pro
and up
• Once turned on, Multicurrency cannot be turned off
• This is my interpretation based on my experience in
using Multicurrency
Multicurrency Set Up
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Edit: Preferences> Accounting> Company Preferences Tab> Tick USE
MULTICURRENCY.
Choose Home currency> New Zealand Dollar
Note: Once turned on Multicurrency cannot be turned off
The Tick box Use foreign prices on items gives you the ability to create a fixed
foreign price for any items sold. The foreign price is used in foreign transactions
that match the currency selected in the Use foreign prices on items preference.
(You can only have one foreign item currency)
This allows for a foreign sales price to be recorded in the item info as well as
NZ$. This preference can be turned on or off at any time.
Multicurrency Set Up
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Once Multicurrency is turned on the Currency List is available under Lists > Currency List
This is where you update the default Exchange rate for your active currencies.
There are many currency converter websites and I tend to use
http://www.oanda.com/currency/converter/ Make sure you convert the foreign currency
into NZD
Once Multicurrency is turned on:
Each transaction will now have an additional field in order to enter exchange rate
For each Supplier &/or Customer using a different currency QuickBooks requires a matching
Accounts Payable &/or Accounts Receivable account to be created first linked to the
appropriate foreign currency. You cannot change the Currency set to the Customer/supplier
once used.
Foreign Currency Bank accounts will also need to be created if the client uses one.
QuickBooks also adds an expense account called “Exchange Gain/Loss”, this is where
QuickBooks posts any realised currency exchange gains or losses
Multicurrency Set Up
Expense account created when
multicurrency is turned on
"Exchange Gain/Loss
Register balance displayed
in Foreign Currency
Currency & Exchange Rate Box
Customer Centre amounts displayed in
Foreign Currency
When does Exchange Gain/Loss record on transactions
1.
Transfer To/From AUD Bank to Foreign Bank DOES NOT create a Gain/Loss. This only revalues the foreign
Bank Account for Balance Sheet.
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This example I have transferred 10,000 USD from NZD Bank To USD Bank using the NZD currency in Transfer Currency Box
and the revaluation of the US Bank Account is using the exchange rate 1.41068
2.
Creating Credit Notes or Applying credits In AR & AP DOES NOT create a Gain/Loss. It uses the Exchange
rate for revaluation into AUD for Balance Sheet
Enter Bills & Invoices DOES NOT create Gain/loss. It uses the Exchange rate for revaluation into NZD for
Balance Sheet
3.
When does Exchange Gain/Loss record on transactions
1.
Receive payments, Pay Bills create an exchange Gain/Loss. Even if you create a
transaction in a foreign currency and pay or receive money into Foreign account.
It is recording the difference between the exchange rate on original transaction
as opposed to payment rate.
If you do not want to record an exchange variance then use the same rate for both transactions.
GST rounding on Foreign Transactions (0.01) will be booked to Exchange Gain/Loss account
Exchange Loss $13.37
Invoice raised $US 1,650 incl GST @ 1.41068 NZ$916.94
Partial Payment received $US 650 @ 1.39010 NZ$903.57
Difference = Exchange Gain/loss Gain $13.37
Rules For Multicurrency
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Do not change exchange rate on an Invoice or Bill that has payments applied.
This will create a discrepancy (value of Change) in the NZD$ balance. As the exchange
Gain/loss calculated with the payment remains unchanged the Gain/loss is now incorrect. To
fix this requires a Home Currency adjustment or to force a revalue of the exchange gain/loss
by opening payment, untick invoice paid and then retick.
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Do not change the Exchange rate on a bill recording inventory item.
This will change the AVERAGE cost for the affected item as it revalues the transaction. This
will change balances on Balance Sheet (Inventory asset) and Profit & Loss (Cost Of Goods
Sold) if the item has been sold.
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Do not leave unapplied payments & Credit Notes.
This causes discrepancies in the reports and to the calculation of the Exchange Gain/loss. If
possible use the same exchange rate for Credit notes as the original transaction.
Rules For Multicurrency
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Think about using Fixed Monthly Exchange rates per each month.
This will make it easier to keep track on the accuracy of rates used on each transaction
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Calculate the exact Exchange rate when money is actually paid into or out of NZD BANK
account.
The Exchange rate to use in this scenario is the actual as per bank statement. To calculate to
the correct decimal places in order to match the bank statement, use the windows
calculator. Divide the Foreign amount into NZD eg NZD$$ / USD$$ = Exchange rate
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Exchange Rate not changing to current Rate when converting Sales Orders into Invoices.
When Purchase Orders are converted into Bills the Exchange rate updates to the default
Rate, this is not the case with Sales Orders. When SO are converted into Invoices the rate
remains the same as SO rate. You are required to remember to update the Rate.
Rules For Multicurrency
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GST reporting incorrectly on Foreign Currency transactions with TAX CODES on Tax Reports.
Tax Summary ,Tax detail & GST 101 reports display the total tax column $value incorrectly when
a Tax code (S) is used in a Foreign Currency transaction and there is an Exchange rate change. It
keeps the original NZD GST converted rate and only updates the net. Only affects Tax reports and
not General ledger. Reports affected are all BAS Engine Reports. Eg. Tax Summary, Tax detail,
BAS Engine. The Fix is to delete the tax code, tab and re enter Tax code for each line on
transaction, RE SAVE. Only affects Foreign Currency transactions with Tax codes.
Balancing Sub ledgers to Balance Sheet
AR & AP ledgers need to be balanced to the Balance Sheet periodically (at least at End of Year)
In this scenario we are looking at Accounts receivable Scenario
US$ scenario Customer (USD$)
1. 16/02/10 Invoice Raised US$3,300
1. 02/03/10 Adjustment Note Raised US$495
1. 12/03/10 Partial Payment received US$ 2,000
1. 14/03/10 Balance of payment received US$805
US$
Balance on 02/06 is US$1,000 NZ$1,410.68
Rate
Bal US$
Exchange
Gain/Loss
Bal NZ$
3,300.00
4,722.30
1.431 3,300.00
4,722.30
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495.00
700.47
1.4151 2,805.00
4,021.83
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2,000.00
2,783.00
1.3915
805.00
1,159.83
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79.00
805.00
1,120.16
1.3915
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7.88
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31.79
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7.88
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13.37
132.04
1. 31/03/10 Home Currency Balance Adjust to clear $
2. 01/05/10 New Invoice raised US$1,650
2. 02/06/10 Partial Payment received US$650
NZ$
7.88
1,650.00
650.00
2,327.62
903.57
1.41068
1.3901
Balancing Sub ledgers to Balance Sheet
Reports to set up to check balances:
1. Customer Balance Detail Report:
REPORT TO CONFIRM BALANCE OUTSTANDING in Foreign Currency AT A PRTICULAR DATE back in time
**MUST enter correct From & To Dates taking into account date of oldest transaction outstanding
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Customer Balance Detail Report:
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Modify: Display
• Un tick Amount & Balance
• Tick: Open Balance, Actual Rate, Currency, Foreign Balance
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Advanced Tab: Open Balance/Ageing Reports at REPORT DATE
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Modify: Filters
• Account: Multiple accounts: Choose the AR-Foreign account
• Modify: Header/Footer: Rename Header by adding Currency
Balancing Sub ledgers to Balance Sheet
2. Customer Balance Summary
• Modify: Filters
• Account: Multiple accounts: Choose the AR-Foreign account
• Modify: Header/Footer: Rename Header by adding Currency
3. A/R Ageing Summary
• Modify: Filters
• Account: Multiple accounts: Choose the AR-Foreign account
• Modify: Header/Footer: Rename Header by adding Currency
Balancing Sub ledgers to Balance Sheet
4. Customer Open Invoices
**Designed to display outstanding customer balance in NZD$ & not able to accurately display
customer outstanding in foreign Currency as it does not take into account adjustment
notes & Partial Payments.
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Modify: Filters
Account: Multiple accounts: Choose the AR-Foreign account
Modify: Header/Footer: Rename Header by adding Currency
Advanced Tab: Open Balance/Ageing Reports at REPORT DATE
Modify: Display
Un tick Terms, Due Date, Ageing
Tick: Realised Amount, Actual Rate, Foreign Amount, Currency
Balancing Sub ledgers to Balance Sheet
NZD$0.00
-NZ$7.88 due to 7.88 Home currency
adjustment
Balancing Sub ledgers to Balance Sheet
Balance of AR US$ in Balance Sheet will equal balance in Customer
Summary Report. They show a balance of $7.88 NZD owing due to the
discrepancy of the Exchange rate used on the Credit note as opposed to
the invoice.
Reason for Balance Discrepancy
Adjustment note raised $US 495 @ 1.4151
US$ 495
NZD$ 700.47
Original Invoice rate 1.43100
US$ 495
NZD$ 708.35
Difference between Invoice Rate & Adjust Note Rate
NZD$ 7.88
Balancing Sub ledgers to Balance Sheet
The Balance on Open Invoices, Balance Detail reports & Ageing Reports show Zero NZD as outstanding.
This creates issues with Auditing as they compare Balance Sheet AR to AR Ageing report. Accountants
need to compare Balance Sheet AR to Customer Balance Summary as these two reports should balance.
To balance this discrepancy a HOME CURRENCY ADJUSTMENT is required
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Make general journal Entries
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Tick Home Currency adjustment box
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Create Journal to balance discrepancy to the customer and offset to Exchange Gain/Loss Account.
To Revalue Foreign Accounts for end of period adjustments:
Decide on the period that is required for revaluation purposes
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Create Unrealised Gain & Loss report (Reports> Multicurrency)
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Choose the Exchange rate for revaluation
The report will revalue the Foreign accounts with the adjustments required
Enter the adjustment as a HOME CURRENCY ADJUSTMENT
AR & AP accounts will require a name to book the adjustment to.
I use US$ AR Revalue for AR. US$ AP Revalue for AP.
I reverse the revaluation at the beginning of the next period
Book the revaluation to an account Unrealised Gain/Loss Account
Wish List
• Need the ability to choose Use foreign prices on items for
purchasing as well as invoicing. Eg being able to produce a
Purchase order choosing Foreign Currency and not NZD
• Need Sales Orders to update exchange rate the same as Purchase
Orders
• Update the currency list over the internet
An in-depth look at QuickBooks Multi-Currency
functionality.
Questions
Presented by : Julie Gordon