For many businesses today, the economy is global. That means an accounting system needs to support multiple currencies, and QuickBooks 2009 meets that need with support for all global currencies. Let’s see how these features are implemented. We have screen shots of how it all works below, organized to match the menu and a typical workflow.
First, multi-currency support is off by default. It’s a company preference on the Edit->Preferences->Multiple Currencies menu. Once support for this feature is turned on for a particular company file, it can’t be turned off. When you track multiple currencies, you need to specify the home currency, which for US-based businesses is the US dollar. At the end of our review, we’ll see that one impact of tracking multiple currency transactions is that QuickBooks will automatically create an Other Expense account named Exchange Gain or Loss to record unrealized foreign exchange-related gains and losses.
To get oriented, access to multi-currency features are on the Company->Manage Currency menu.
QuickBooks 2009 offers the ability to download the latest exchange rates. As you can see from the Currency List captured after completing the download, exchange rates for only 12 of the most actively traded currencies were available. If you’re using a currency for which exchange rates aren’t readily available, you’ll have to enter that rate manually.
There’s also a Currency Calculator that can calculate the home amount, foreign amount, or exchange rate. The home amount (e. g. US dollars) is the product of the exchange rate and the amount of the foreign currency. The foreign amount is the result of dividing the home amount by the exchange rate. The exchange rate is the result of dividing the foreign amount by the home amount.
Home Currency Adjustment is used at the end of an accounting period to adjust your balance sheet accounts to reflect exchange rates on the balance sheet date. Balance sheet accounts are adjusted up or down by the amount of the unrealized gain or loss and posting the offsetting debit or credit to an Other Expense account. By default, the Other Expense account is named Exchange Gain or Loss. Until a home currency adjustment is recorded, balance sheet accounts represent the value in the home currency at the exchange rates used at the time each transaction was recorded. If the exchange rate has increased, your home currency buys more of the foreign currency, so the home currency adjustment will result in an unrealized gain. Home currency adjustments are calculated based on unrealized gains and losses. For example, for a customer invoice, gains or losses are unrealized until payment is received; after that, they’re realized and a currency adjustment is no longer applicable. QuickBooks 2009 provides reports for both unrealized and realized gains/losses, so we’ll see this in greater detail when we review these reports and the impact of entering a transaction that originated in a foreign currency.
Rounding out the Multiple Currency menu are 2 help tools. There’s a link to a multicurrency overview in the QuickBooks help file. There’s also a link to the Multicurrency Resource Center. Unfortunately, at this writing, this link just opens the QuickBooks integrated web browser and navigates to a general link that doesn’t contain information on using multiple currencies. Since foreign exchange is a new topic for QuickBooks users, hopefully Intuit gets a specific link up soon.
Let’s see how multi-currency accounting affects some typical transactions. Before we can enter transactions in a foreign currency for a customer or a vendor, we have to specify the currency in which all transactions for that customer or vendor will be recorded. If there are no transactions, we can edit an existing customer or vendor; otherwise, we’ll have to create a new record. We’ll start by creating a new customer and specifying that this customer will be accounted for using the €, or Euro. Next, we’ll produce a customer invoice but we’ll change the exchange rate to 1 Euro (€) = 1.5 US dollars.
At this point, because the customer invoice has not been paid, any foreign exchange-related gains or losses are unrealized. So let’s generate the Unrealized Gains & Losses Report by first entering the exchange rates for those currencies for which there are outstanding transactions.
Next, let’s record receipt of the customer’s payment in full. Both the invoice and the payment will be recorded in the same currency, the Euro (€). We’ll change the exchange rate to 1 Euro (€) = 1.25 US dollars to reflect a change in the exchange rate. Because this invoice has been paid, any foreign exchange related gains or losses have now been realized, so they’ll show up on the Realized Gains & Losses Report.
We’ll wrap up our review of this simple multicurrency transaction by looking at the impact on the company’s records. Press the 
Journal button (or alternately, Ctrl Y) while viewing either the customer invoice or payment to see the specific entries QuickBooks made. The Journal for our Invoice transaction shows the debits and credits for that transaction. Next, let’s go back in time to before we entered the customer payment to review the unrealized gain or loss that would be recorded by entering the home currency adjustment described above. That’s the adjustment at the end of an accounting period to reflect exchange rates on the financial statement date rather than the original transaction date.
Let’s start with the Profit & Loss by running the Profit and Loss Standard report from the Reports->Company & Financial menu and pressing the 
collapse button. Here we’ll see the default account Exchange Gain or Loss created by QuickBooks when we enabled multi-currency tracking in our company file.
Finally, let’s review the Balance Sheet. Note that in order to demonstrate another aspect of multi-currency, this balance sheet was prepared as if the customer payment had not been received. It’s also based on recording a home currency adjustment as depicted above, where we changed the exchange rate to 1 Euro (€) = 1.75 US dollars. We’ll see that our customer receivable has been adjusted up by $250 because of the change to the exchange rate between the date we billed the customer and the date we entered the balance sheet. The upward adjustment matches gain reported as an Exchange Gain or Loss. Since our Exchange Gain or Loss account was an Other Expense account, the gain is shown as a negative expense. Once multi-currency tracking is enabled, balance sheet subaccounts will be created automatically for every currency with transactions.
Multi-currency tracking is one of the most powerful new features of QuickBooks 2009. Now it’s time to generate more foreign business!
[ +4 rating, 4 votes ]
Loading ...You May Also Be Interested In ...
- QuickBooks 2009 Is Here! (5.3)
Looking for discounts on QuickBooks? Check out our 
Hi. We just converted to QB. We are in Malaysia but most of our vendors trade in USD and our customers in our local currency. I keyed in all our inventories with cost (in USD as our vendor is already tag to USD) and sale price (in local currency). When I look at “Chart of Accounts”, I see “Inventory Asset” with the correct figure but it is in our local currency. Can I know is there a way for me to key in the exchange rate so I can have the right amount? If I were to update the cost price to our local currency manually now, will it pose any problem when we make a new order (in USD)? Thanks
Inventory is maintained in your home currency. You’d normally record the exchange rate for transactions on forms. Inventory receipts typically come from vendor bills, and inventory deductions come from customer invoices or sales receipts. Outside of recording an exchange rate on a form, QB does have an ability for you to enter exchange rates, but those rates will only apply to the transactions on the relevant dates.
When you make a new transaction in USD (either vendor receipt or customer sale), you’ll want to record the correct exchange rate. That’s how your home currency books will stay accurate.
We are using US$ and Euro bank accounts to make wire transfer payments to vendors. How do I record the Euro wire transfer fee if the home currency we are using is US$? I’ve set-up a Wire Transfer Fee expense account in the Chart of Accounts, but expense accounts are only in the home currency.
Cathy
Create a vendor for the bank/institution that charges you for wire fee and specify the appropriate currency. Enter a bill for that vendor using your foreign currency (ie, not your home currency). When you do that, you can enter line items in the foreign currency even though the expense account is in USD. QB will convert the foreign balance to USD using the exchange rate on the transaction.
Chief Mechanic,
We run an operation in Venezuela and keep our books in their local currency. We need a tool to convert them to US$ at the transactional level (i.e. not just the ending balances). Do you think that QB may offer help? Just to be clear, we are not intending to implement QB full-blown as there are many nuances to Venezuela that are better dealt with by the local package. However we think that the multicurrency capabilites may help us to get our financials to US$.
To expand further, what we have in mind is to download all the transactions from the local package and uploading them into a system (e.g. QB). With this, QB would convert to US$ using the appropriate e/r.
Please let us know if you think QB is worth looking into.
Thanks.
My quick impression is that QB would not be the best tool for this. I think you’d be better to export your transactions to Excel and do conversions with that program. Check out our article on online sources of exchange rates. Someone with medium to advanced skills in Excel could use lookup functions to grab the appropriate exchange rate that you download into an Excel worksheet from an online data source. Keep in mind those online rates won’t match your actual rates, so another approach is to use the actual spot rates your firm used on each transaction. Either way, Excel will be a more powerful and flexible tool.
Want when prints my invoices should show currency xchange rate and total. how can this be done?
Edwin – Exchange rates don’t really apply to an invoice, since a customer is set up to use a currency and the invoice is generated in that currency. As for controlling what is printed on an invoice, take a look at the Lists->Templates menu choice, and edit the form you want to change. It’s a good idea to make a copy of the form before making any changes, and to start by making your changes to the copy to see if you’re satisfied. Hope that helps.
Chief Mechanic,
can you help me with multicurrency. It doesnt work. I have to use my home currency and I cant store acutal purchase price in currency other than home. this makes a mess and I spent a lot of time of the phone when I first installed Pro over a year ago. tech ended up telling me I;m out of luck and maybe intuit will fix it some day
Ben, we can try to help. You’ll have to clarify what you mean by “it doesn’t work”. It may not do what you want, but the functionality does work. Can you supply more details on what you’re trying to do? You might find it easier to pose new questions in our forum.
I cannot do something simple like send a PO to my vendor with the correct Euro price. I have to enter the Euro price everytime. QBs only works with the home currency and the daily exchange rate is never correct. even the spot rate from the download is not the rate I pay.
if you know someone who can fix this I am willing to pay for the answer.
this costs me a lot of time
Ben
(616) 881-3328
Ben, can you clarify what you want to fix? Keep in mind that no accounting system can get around having you record the actual rate that applies to a financial transaction. Downloaded rates will always be a reasonable estimate which you’d only use if you didn’t have actual exchange rates. As for sending PO’s with the correct price in EUR (presumably a foreign currency to your firm), the problem is that QB does not support multiple currencies for items. QB’s approach to items and COGS is to only account for those in the home currency. As a result, you have to get the exchange rate on your PO right, and that’s probably where the work is coming in. Since the PO needs to have accurate USD amounts, you can’t simply change the USD values to EUR values for an item (or create a second item with EUR values). About the closest you can come is to put the EUR pricing in the description.
While you may not like Intuit’s approach of accounting for items in the home currency, the alternatives aren’t clearly better or less work. The only way it might be less work is to set up a EUR subsidiary (even if it is just virtual in that it only exists as a QB company file), and handle the accounting in EUR. Your home currency would be EUR, so your PO’s, bills, and invoices would be in EUR. That can work if you are buying products in EUR and selling those same products to customers in EUR. However, if products are crossing currencies, the QB approach is probably the least amount of work.
Hope that helps.
Hello Chief,
Based in Ghana, using USD, Euro, and Ghana cedis. Can I purchase pro for these great multi-currency functions or do I have to go with Premier?
Tim, yes QB Pro supports multicurrency. You can check out our article on the feature differences between QuickBooks Pro and Premier. You also may want to note that QB 2012 will be shipping on September 26th. As soon as it is available, you can download it directly from Intuit by following the links on our Buy QuickBooks page. It may take us a few days to update the graphics on our site, but if you click through you’ll get a discount and be taken to Intuit’s page, where you’ll see what version you’re getting. If you need it sooner, we can check Intuit’s policy on upgrades when a purchase is made close to a new version.
Tim, I forgot to mention that both the Euro (EUR) and the Ghanaian Cedi (CHC) are supported currencies in QB’s currency list.
GHC is Ghana’s old currency. The current currency GHS cannot be set as the home currency in QuickBooks Pro 2012 R5.
Sources:
http://www.ghanacedi.gov.gh/Re-Denomination/technical-guidelines.html
Thanks for the feedback, Kwabena. Have you passed that along to Intuit?
As for another question, our company issue shares, and our home currency is Canadian dollar. Some shareholder pay US dollar to purchase our shares. So if I receive cheque for US$10,000, I deposit it to our US bank account, then I will do the general journal as debit US bank account for CDN$ 9262 (exchange rate at 0.9262), and credit for share capital CDN$9262. At month end, I will do the home currency adjustment for the bank balance use the month end date exchange rate, the difference with the QB balance will go to exchange gain/loss, is that right? Or is there any correct way to record this transaction?
Thanks!
Your approach is fine, but as long as you hold share capital in a currency other than your home currency, you’ll continue to have exchange gains or losses. Imagine a company with no financial activity, a home currency of the Canadian dollar, and a bank account in US dollars. Even with no financial activity, that company will have exchange gains or losses as exchange rates fluctuate. If the company transferred the funds from the sale of shares to the home currency on the date of the share sale, exchange gains or losses would be virtually eliminated.
Our former accountant use “Enter Bills” to record an account payable, but sometimes she use “write cheques” to pay that bills, sometime she use general journal to pay the bill. That result when I use “pay bills” to make payment, there are some bills shown as unpaid, but actually they are already been paid. How can I remove these “unpaid” bills from the “pay bills” list.
Thanks
First, it’s bad practice to use Write Checks to pay a bill once it has been entered. The simplest and easiest way to pay a bill is to use the Pay Bills function. While not the simplest method, you can use a general journal entry to pay a bill provided the A/P account is on the first line of the general journal entry, and the vendor appears in the Name column.
For the situation where Write Checks has been used to pay a bill, you can either void or delete the bill. As a general rule, voiding should be used over deleting. Before doing either, you should make sure that the accounts in the lower half of the Write Checks window match those in the Enter Bills window, or, if they’re different, that you approve of the change. When you void the bill, you can record a memo that the expense was accounted for by a check, and supply the check #. That will help track the change in the future.
Eliminating residual vendor balances when using multi currency?
I’m running a USD home currency with FC vendors. The change in rates between invoice entry and payment results in residual USD vendor balances after bills are paid. Home currency adjustment isn’t eliminating them.
Has anyone dealt with this? Can you tell me if I’m missing a step or if you’ve come across a technique to solve this?
Thanks!
I assume by “FC vendors” you mean foreign currency vendors. If you have a foreign currency vendor that you owe 100 units of a foreign currency and pay the vendor bill for 100 units in that foreign currency, the vendor’s balance should be 0 in that currency. That’s the way US QB works. I’ve seen instances in older versions of Canadian QB that exhibited the problem you’re describing. Are you using US QB? If so, what’s your program and year?
As for another question, what is the actual source of the exchange rate data used by Quickbooks/Intuit?
Yes, there is a market, but there are many market data providers. Needed for audit…
Appreciate any insight
Rob, see our article on the exchange rate source. The notion of “needed for audit” comes up a lot, but it really shouldn’t be needed. The exchange rates downloaded in QB were not intended to be more than a guide; the actual rates applicable to a transaction should always be used.
I am using Quickbooks Enterprise 11., I record every transactions in local currency ( Birr) but every month I need to send reports to USA in USD. Do u think Quickbooks can do this, please help me..
No, I don’t think it can, unless you make a pretty big change. It sounds like your local currency is your home currency. That’s the currency for your financial reports. If you make USD your home currency, you can send financial reports in USD easily, but that’s a pretty big change. If you did that, you would have to revise the entry of most transactions in the past, and record future transactions in USD – something that may not be appropriate for your business.
We use QuickBooks Pro 2009 and have this problem with multi-currency and exchange rates.
Scenario:
We purchase most of our inventory in China, payments are made in advance,, items may
be received in more than one shipment, therefore more than one bill.
1. We create a BILL CREDIT for the prepayment on January 1st.
2. We receive part of our order and bill February 1st. and pay the bill from above CREDIT.
3 We then receive the rest of our order and bill March 1st. and pay bill from CREDIT.
Now if the EXCHANGE RATE is different on the BILL RECEIPTS from that of the BILL CREDIT ( which is normal ) the amounts of these transactions in the GENERAL LEDGER is incorrect, however, the amounts
in Accounts Payables IS correct. Of course we end up at the end of the year out of balance.
Another thing to add here is that we have many BILL CREDITS and many BILLS for this vendor, some BILLS will be paid using more than one BILL CREDIT.
Is there any way around this apart from ensuring that every BILL CREDIT and every BILL for this vendor has the same EXCHANGE RATE.
I welcome any suggestions, thank Peter.
I think you have a mis-understanding of how exchange rates apply to your circumstances. Let’s say you make an advance payment at a given exchange rate on January 1st (your example), and you receive shipments on February 1st and March 1st. Your vendor should be set up to use Chinese Yuan (CNY) and your payment to that vendor should match the vendor bills submitted by that vendor in Chinese currency. So there should be no “out of balance” situation in Chinese Yuan (CNY), unless the vendor billed you for a different amount than you paid.
The difference in the exchange rates (on January 1, February 1, and March 1) may create either an exchange gain or loss, but that shouldn’t create a situation where your GL is incorrect, because QB takes care of exchange gains/losses.
You don’t want to set every bill and bill payment to the same exchange rate, because that would contradict reality. You want to use the exchange rates in effect on the date you made the transaction to acquire the foreign currency or goods.
As for using bill credits to record the payments, you can also use general journal entries provided that the entry to A/P is the first line of the GJE. When you pay a bill with multiple GJE’s, you would simply pay as many bills in full as you could. That would leave a remainder on the GJE, which would be used to pay other bills, until that GJE was “used up.”
Hope that helps.
Every now and then a client of ours messes up their bank transfers. We invoice them in USD from our Hong Kong company, and they pay us in HKD instead of USD.
How do we clear out the original accounts receivable in USD with a payment recorded in HKD? We end up having to create a whole new “customer” just to record the payment in the new currency. And we are never able to reconcile the two so we can provide the customer with a correct Statement. The HKD ‘customer’ always has a credit, and the USD ‘customer’ always has an unpaid balance.
First, to avoid creating new customer accounts, simply record the payment in the account of your USD customer, even though it was paid in HKD. To do that, if your customer pays a USD invoice in a currency other than USD, calculate the USD equivalent by dividing the foreign amount of the payment by the exchange rate. Record that USD equivalent as the amount paid – not the actual foreign amount. Add a memo describing the conversion. From the customer’s point of view, the customer records the foreign amount, so the memo is the way to connect the transactions. Your USD customer’s statement will be accurate in that currency, even though all payments were not made in USD.
Second, if you’re using the Undeposited Funds account, QB will put the USD equivalent of a payment from a foreign balance customer in the Undeposited Funds account. Once a USD balance is in your Undeposited Funds account, you can convert this into a Deposit in a Bank account in any currency simply by choosing the exchange rate and the foreign balance Bank account on the Banking->Make Deposits menu selection. That way, your HKD can be deposited into a HKD denominated bank account.
That fixes the present and future. Depending on the volume of transactions, I generally think it’s better to fix the past by recording those transactions properly. If the volume is such that that isn’t possible, you could create a clearing account, with a general journal entry to 1 in HKD offset by an equal general journal entry to another in USD. You’d then clean up A/R to apply the open credits.
Of course, the clearing account example assumes that the USD amounts are the same. They may not be. For example, a USD customer that paid a $100 invoice with 100 EUR is going to have a credit balance, and it will be a business decision how to address that.
I have used the multiple currency feature for months, and I must say that it was not designed for my situation and simply does not work for me. Here’s the problem:
I travel 4-6 months a year in foreign countries and have expenses in many currencies. These are charged on my US credit card, and when they clear, they come in as USD at an arbitrary exchange rate with an added fee. The unrealized gain and loss feature holds not the slightest bit of interest for me. When I record the transaction, I record it in the foreign currency and get a rough approximation of how much I spent using the current exchange rate. But when the transaction clears, the USD on the credit card statement is IN FACT what the transaction cost, and it is that amount that I intend to bill to clients and make a permanent part of my books. So let’s see how this plays out in QuickBooks.
1. Entering the transaction. I can’t just use a credit card line to enter the transaction – the system slaps my hand every time I try, because I never remember to open the edit credit card transaction screen.
2. Here is the reconciliation process when the charge clears, FOR EACH CHARGE:
Click on company, drop down to manage currency, drop down to currency calculator. click on calculate, drop down to exchange rate. Look up and hand enter both original currency amount and US currency amount. click calculate. click copy. Find the transaction and click on edit credit card charge. Paste in exchange rate box, then click somewhere else so it calculates. We’re somewhere between 15 and 20 clicks plus duplicate entry of two numbers for EVERY SINGLE EXPENSE I HAD FOR MONTHS!!!!!! Then there’s the fact that at random times QuickBooks wants to change the exchange rate for the day to what I entered, and if I say yes, it messes up other transactions for the same day that have to be RECALCULATED!!
How dumb is this? I feel so trapped with QuickBooks because I have a decade of company books on it, but to make me do this for every hotel bill and dinner for months on end is simply crazy. It is certainly clear that the designers of this feature never thought about credit card transactions in foreign currencies.
Mary,
We have the same issue. I just wait until the credit card bill comes in and then enter the charges in the USD amount. If you are paying in USD the foreign currency is irrelevant. Of course I check all of our reciepts against the bills to make sure the foreign amount charged equals the reiceipt amount. I enter all USD and pay the bill in USD. Credit card exchange rates suck so they are unrealistic anyway. You would need to enter the foreign currency for each charge only if you are paying the bill in that currency. In that case enter the currency that you are billed in for each charge.
hope that helps,
Very informative. Thanks. I need to know as well if I can print checks in foreign currencies. I have accounts in GBP so I can send checks to people as honoraria and I am looking to open accts in other countries. I have to use a UK version of QB on a whole different computer so I can do this. As you can imagine, it is a pain. Thanks for any help on this.
Lester, you can print checks in other currencies, so long as you follow a few guidelines, which we’ve outlined in our KnowledgeBase article: Can QuickBooks Print Checks In Currencies Other Than the US Dollar?
With multicurrency support in the US QB, more and more businesses that previously used foreign QB versions for just this type of thing are “coming home” to the US version. Having 1 software product to learn and manage makes things much easier.
Hi, I am just wondering if you’ll be able to help me with the multicurrency query. I have started to work for an american company which dediced to move to Ireland, registered as a new company and handed over all books over here.I have extracted some old data from previous company and created new company file, started from scratch and set up home currency as Euro. However company is still doing all the business and receiving orders and selling only in USD, to set up new customer accounts, I was wondering, should I set up currency in USD and would be able to track all figures in Euro for P&L and Balance Sheet later on. I am not quite sure how this multicurrency feature works. Thank you for any advice.
Do any of you guys know where/what is the download link for the QuickBooks software?
Thanks for the reply.
Getting confused with multicurrency! I understood the Home Currency Adjustment for ‘Unrealised gains/losses’ on funds held in foreign currencies. Not clear on what exactly Quickbooks consiers Realised gains though.
For example suppose my native currency is USD. I transfer USD100 to an EUR account amounting to EUR80 (Rate 1.25) and later transfer back the entire EUR80 to the USD account but this time get USD110 for it (Rate 1.375). Assuming there are no other transactions, Quickbooks doesnt report the $10 earned here due to favorable exchange rate as a ‘Realised’ gain? It only shows home currency adjustments as realised gains?
I am in a situation where two different currencies are used concurrently. That is, I need to keep US$ based transactions in US$ and FC based transactions in FC. I would like to produce a consolidated report in US$ at then end of the period with exchange gains/loss measures. Would it be relatively easy to keep two sets of accounts separate?
Thanks Chief Mechanic. Good articles those too.
I think I wasnt clear in my question. This article and the links to the 2 articles you gave explain about a transaction involving the home currency and a foreign currency. I was asking about the case of a transaction between two foreign currencies (not as rare as one might think!).
So if my home currency is USD and the transaction I am undertaking is between a GBP account and a EUR account, how does this impact the PL and BS?
The logic is the same as that outlined in those links, but the transactions become more complicated because QB only allows 1 foreign (relative to the home) currency per transaction. In your example, GBP & EUR are both foreign currencies if USD’s are the home currency. So, to transfer GBP to EUR you’d have to pass them through a dollar-denominated account (you could create a wash bank account for this purpose to avoid the transactions hitting your real bank account). In the end if EUR were worth less than what was put in, you’d face a loss. Keep in mind that QB only knows the exchange rate if you tell it the current rate. QB won’t know you’ve incurred a forex loss unless there is a new exchange rate on file in QB.
Thanks for that, also noticed the Balance Sheet 1750 EUR was explained, cool.
I have another (rather advanced) query… if we have bank accounts in more than 2 currencies how do cross-transactions work?
Like if my home currency is USD and I have also have accounts (say bank accounts to receive local payments in) in GBP and EUR, for every transfer between USD and the others its handled by the above automatically.
But how about if I make a funds transfer between the GBP and EUR account? I asked a friend and he says any such transfers can be ignored as reporting is done in the native currency only. But if I transfer 1000 GBP into 1500 EUR and then transfer 1500 EUR back to the GBP account and get back only GBP 900, should this be accounted in some way?
Thanks a lot
More good questions. FYI, we’re building our QuickBooks KnowledgeBase. Both of your questions are addressed directly there. On transferring funds between bank accounts in different currencies, check out this article. For how gains/losses are accounted for, check out this one.
Your friend is right only in so far as reporting is done in a home currency. However, he’s incorrect in that gains and losses still need to be accounted for. That’s what the Home Currency Adjustment function does. In the 2 links above, the GBP balance is upped by the amount of the gain, so you can re-patriate in USD the original deposit + the exchange-related gain or loss.
Great tutorial (especially the pictures help).. thanks
I am a newbie, just a bit confused about some issues with multi-currency. Firstly in the above example, (assuming your home currency is USD) you invoiced the customer 1000 EUR = 1500 USD and received only 1250 USD. Isnt this a forex loss? Looks like it showed up as a gain (negative expense) on the Profit & Loss report?
Good catch, Adam. For the income statement, we linked to the wrong screen capture, which we’ve since fixed. As you correctly pointed out, it is a forex loss, where before it was incorrectly shown as a forex gain. We also added a clarification on the balance sheet, since the balance sheet wasn’t intended to be in sync with the income statement. The balance sheet was intended to display another aspect of multi-currency accounting, where the exchange rate changes before the customer receivable is paid. The balance sheet was prepared based on recording the home currency adjustment shown, before the customer payment was received.
We are using multiple currencies, as we have offices conducting business in both the US and the UK. Is there any way (short of having 2 separate QB company files) to print financials in GBP and USD? Meaning, we want to have one “master” company with 2 subsidiaries. We need to be able to print reports for the US in USD and for the UK in GBP. Is that possible?
Thanks in advance.
This is a great question, Mary. Here’s 1 method that might accomplish what you want (albeit with some tinkering and effort): use classes. Create a class called “US Subsidiary” and another called “British Subsidiary”. Classify every transaction according to these 2 classes. For reports, you can use a Filter to include only 1 class. That would allow you to print a P & L for the US Subsidiary, for example. If you have separate accounts, customers, and vendors for each “subsidiary” denominated in each currency, you’ll end up with reports for each “subsidiary” in the local currency. The tinkering and effort will primarily come in keeping a balance sheet for each company in balance. Although you can use a class filter to print a balance sheet, the resulting balance sheet won’t necessary be in balance. Keep in mind that classes can only be used to track one aspect of your business, so if you’re already using classes for something else, this won’t work. This is a somewhat rough attempt to create consolidated financial statements, a task better suited to Enterprise Solutions than Pro or Premier. For simple P & L’s in different currencies, the result will probably be worth the effort. For a complete set of financial statements, this method will probably expose its limitations before too long. Given that once you turn on the multi-currency feature for a company file, you can’t turn back, you may want to try making a new company file and enter some sample data before pushing ahead with live data. Let us know how it goes.
Thanks so much for your reply. I’ll be sure to give it a try and keep you posted.
You’re welcome. You should be able to print P & L’s in both USD & GBP provided you’ve applied classes consistently and you specify the class as the report filter. Balance Sheets are trickier, because they won’t automatically balance.
A company file is intended to print full financial statements (P & L, BS, Cash Flow) in a single currency. QB Premier also doesn’t support multi-company consolidations, even in 1 currency. So this technique is pushing 2 boundaries of QB. Don’t be too surprised to find limits.
We all want to use the GAAP rules……..
Does the explanation given above mean that without making an annual adjustment in the general journal, an unrealistically high balance on the A/R foreign item (includes unrealised gains due to currency fluctuations) will progressively float away from reality?
If so .. surely this is the opportunity for Intuit to create an easy proceedure to get the annual Balance Sheet right.
We use multicurrency over here in UK trading with Dollar customers and Euro customers so our home currency is Sterling.
The state of our Balance sheet is looking like a picture of fairy land as a result of unrealised gains.
All the best
Roger
Roger, cheers from across the pond.
The easy procedure is already in place. All a user needs to do is download the latest exchange rates, and those will be used to produce realistic financial statements. The only problem that I see with this approach is that the burden is on the user to actually download current rates before preparing financial reports; otherwise the reports may very well “float away from reality” as you suggest. However, that burden is not really very different from other aspects of any financial accounting package. For example, you can print financial statements without ever having recorded depreciation or amortization. In the end, it’s up to the person doing the work.
As to your comment about unrealized gains/losses, are your gains coming from transactions that haven’t closed? Normally, these would close in a relatively short period of time, which would cause them to be realized.
Our multicurrency description is based on a firm with a home currency (in our example, the US dollar) trading with customers or vendors in foreign currencies. Typically, these trades would be closed out in < 1 year, and the accounting treatment for unrealized/realized gains/losses would be as accurate and timely as the foreign exchange rates a user downloads.
Different considerations would apply in consolidating a foreign subsidiary doing business in its own currency into the books of a home currency parent.
How about the revenue and expense associated with the transaction? If you have made a sale, the other side of the receivable is revenue. Typically this is converted at the average rate for the period the revenue was earned – it appears that in quickbooks 2009, this would incorrectly be at the spot rate used when the invoice was generated. As we live in a global economy, hopefully quickbooks will enhance the multicurrency feature in the next version so that it is compliant with GAAP.
I’m not sure currency conversions at an average rate are required for GAAP. Take a look at FAS No. 8. Under paragraph 29, the use of averages is permitted, but not required.
Paragraph 13 states:
It seems FAS No. 8 encourages currency translations into dollars based on rates “on the dates they occurred.” This is exactly what QuickBooks 2009 does, so it seems to me it’s GAAP-compliant just as it is. Not using averages raises a separate issue of how firms entering large volumes of non-dollar denominated transactions can insure the correct rate was used in transaction entry.
http://www.fasb.org/pdf/fas8.pdf