QuickBooks Multi-Currency Features

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 QuickBooks multi-currency features are implemented. We have screen shots of how it all works below, organized to match the menu and a typical workflow.

First, QuickBooks 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 QuickBooks 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 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 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!

Comments

  1. We had set up Europe cost center as a class using manual usd input after manual convertion. Now we want to add euro currency to qb to cut down the manual process. What happen to the historical data of this cost center if we want to add mutilcurrency feature to this cost center? And what is the best way to do it without effecting the past closing fiscal year data ? Thank you.

  2. My organization is located in Korea so it uses KWR(Korean Won) as a ‘home currency’, and the branches in Africa use multiple currencies(e.g. Dollar and local currency) for even small payment. So we need to do ‘Home Currency Adjustment’ with at least two currencies for regular financial reporting
    Is it possible to apply multiple currencies(more than two) with home currency?

  3. Lily Fang says:

    Hi

    We bought 2014 Desktop version. When we do revaluation, it goes to exchange Gain or Loss account which is an income statement account. If I manually change to unrealized exchange Gain or loss account, do I need to reverse it next Month and revalue at month end again? How to use QB home currency revaluation feature to reconcile unrealized Exchange Gain or loss account on balance sheet?

    Thanks.

  4. I know how to use the Multi Currency already. I just need this question answered as below:

    I have been using Premier 2007 in the Non-Profit version in Uganda. It does not have a Multiple Currency option. I just upgraded with Premier
    2011 Non-Profit from a version I was no longer using in the USA. I have already imported my company file into the new version and converted to 2011. I intend to use the multi-currency option.

    When I turn on the option I fear it may convert the existing values of the previous version causing them to change. Although the previous version was default, I fear that it will read as dollars. After turning on the multiple currency option I cannot go back and reverse the option. When I choose the Schilling as the exchange rate will Quickbooks try to multiple the pre-existing values using the exchange rate for the dollar, thus multiplying the value by 2750, which is the exchange rate for the Ugandan Schilling?

  5. Zahid Mayar says:

    I am working for a construction company in Afghanistan all our transactions are in Afghani while I am preparing report it gives the amounts in USD how I can Adjust the currency exchange rate for all those transaction that are being entered in to the system in the past ,

    Thanks

  6. Amfri Farms Ltd says:

    Hi,

    I have purchased quickbooks 2014 and I use Multi-currency. I have a list of organic Agric. products that I sell to different customers all over the world. My challenge is these customers have different currencies and each customer has a different buying price. I have tried to input a product list in the system but got defeated on setting the selling price for each product. (Remember customers use have different currencies i.e EURO & USD). we set our prices basing on the distance and how goods have to reach our customers, therefore prices differs. I would like to be helped on how to set different prices for the same product.

    You quick response is highly appreciated.

    Margie

    • Celine Vu says:

      I am very interested in the issue above!
      To me, of course, the cost of item is at the average cost of home currency.
      The sales price would be settle Edit Markup “Use default (Always ask about updating sales price)”; and manually enter the mark up % depended to which customer has specific sales price as necessary need.
      Hope that the QuickBooks professional or experience people could give me more advices if my comment is wrong.
      Regards,

      Celine Vu

    • Margie,
      What you are trying to do was possible in previous versions of Quickbooks (pre 2010 or 2011 if I remember correctly) by enabling Price Levels in Sales & Customers preferences. You could apply a custom price level multiplier (e.g. I would base this multiplier on a custom currency exchange rate that I wished to use) and create a new custom “static” price list of all your Items for that particular price level. There was no limit on how many of these custom price levels you wished to create.
      This method worked beautifully until the Quickbooks programmers broke this feature (in 2010-2011?) so that the static price level you so carefully controlled, now get the system’s Currency Exchange Rate involved in the calculation, so that your price list is now variable from day-to-day along with the normal Currency Exchange Rate daily fluctuations. There is no way to shut this off so that the user can remain in full control of his/her prices based on the user’s custom price level multiplier.
      Since then, I disabled my Custom Price Levels, hoping that someday I dould speak with a Quickbooks programmer about this, and other, serious multi-currency issues (Case# 69519734, 535439160, 537230245, etc, …..Quickbooks has never followed through with fixing these programming errors).
      Good luck trying to get a hold of anyone in Quickbooks Tech support who can think beyond their standard scripted responses. I have been a loyal Quickbooks customer with fully paid anual Premier Subscription Service since 2006, and am sad to say that I have finally given up to go search for an alternative software accounting package that doesn’t generate calculation errors.
      Regards,
      Lucas.

  7. Hi,
    We are in Tanzania, and I have 2006 version and have been happy. Tried to upgrade at one stage to 2010, but it did not support one thing that QB has to do. We have an electronic tax device (by law) connected to our QB invoice. We invoice in USD with base currency as TZS. On the invoice we have the TZS total and VAT, with labelling so that the the elec tax device can read the amounts and report automatically.
    2010 did not allow me to add these fields as 2006 could.
    My XP machine is slowly reaching its natural end (getting too slow) and we need to upgrade soon! Just bought my new win8 maYour advice on which version to move to would be great.
    With thanks
    Anton

    • Chief Mechanic says:

      The answer to your question is going to be controlled by compatibility with your tax device. We only work with US versions of QB, so our comments are limited to that version. That said, versions of US QB from 2009 forward include multicurrency support. At this point, I think you should try QB 2014 and see if that works with your device. Even if you could buy an earlier version of QB (such as 2011 or 2012), you then might face issues because of compatibility with the latest version of Windows.

      If your device isn’t compatible, I’d explore other devices or methods of capturing the required data. It would be very unfortunate if you were required by law to operate a device that isn’t compatible with current versions of popular software.

      If all else fails, work backwards. Get a list of all the tax devices compatible with Windows 8 and find out the latest version of the accounting software they support. If they’re QB, great. If not, dig deeper and find which systems can import data from QB. Obviously, before switching to any new system, conduct tests to make sure your accounting information is accurate.

      Good luck.

    • Hello:

      We are running QuickBooks Pro 2013. We have loans receivable from customers in a foreign currency. Whenever we run the “Home Currency Adjustment”, the general ledger gets updated with the correct revaluation of the loan balances. The problem however is that the A/R subledger is not adjusted, so both reports, which are expected to be in agreement, are not.

      How do you fix this?

      • Chief Mechanic says:

        Which reports don’t balance? Your balance sheet is in your home currency. What report are you referring to when you say “A/R subledger”?

    • Lusajo T. Mwakyusa says:

      Hi Anton,
      I am in Tanzania too, I do support QuickBooks UK version in Dar es Salaam.
      Were you able to solve your problem regarding the Electronic Fiscal Devices (EFD)?

  8. Fred Costas says:

    We have 3 companies, USA, UK & India. Can we create a file for each company with the corresponding home currency in $, UK Pounds & Indian Rupees? 3 sets of books, one for each country. Also, can this be done in US Quickbooks Premier? Thanks.

    • Chief Mechanic says:

      Yes, it can be done. To the extent that you never (or at least infrequently) have to consolidate or are comfortable doing manual consolidations, this is the route to go. It’s even better if the companies are unrelated (even if they have the same owner) and you never have to do a financial statement consolidation.

  9. Maria Juana Mathews says:

    Hi! How can we reflect customer deposits in FOREIGN CURRENCY received before the invoice is issued? (We use quickbooks Pro 2013)
    QB online help suggests to create a current liability account “Customer Deposits” and an item other charge called “Customer deposit”. This doesn’t work in our case as this current liability account will be by default in local currency and we are receiving the deposits in foreign currency. If we create an “account payable” instead of “Current Liability” we can use foreign currency, but then QB doesn’t allow us to match this account with the item “customer deposit”. Pleaseeeeee help!
    Thanks in advance

    • Chief Mechanic says:

      You’ll need to use an A/P account in the foreign currency, and you may also need to set up a “wash” account, which can be a bank account so the currencies match. Customers making foreign currency deposits would need to be set up as both customers and vendors. When you receive the deposit, you would record a general journal entry to the foreign currency A/P account, where the customer’s vendor account name appears on that line of the general journal entry. The entry would be a credit to the A/P account and a debit to either a bank account or undeposited funds.

      When you want to apply the credit, you would debit the foreign currency A/P account and credit your foreign currency A/R account. With a general journal entry made to either A/R or A/P, you must put either a customer or vendor name, respectively, on the same line as the A/R or A/P account. For that to appear in a center such as customer center, the entry usually needs to be the 1st line. That’s where the wash account comes in. You would create 1 GJE with a debit to foreign currency A/P and a credit to your wash account. You would create a 2nd GJE with a credit to foreign currency A/R and a debit to your wash account, which would cause your wash account to be 0.

      If you can’t apply the 2nd GJE to the invoice to pay it, you’ll need to replace that step by creating a credit memo. You’d create an item which would point to your wash account (that’s where the debit would end up), and you would record a credit memo to move the deposit to be used against an invoice. Then, as the final step you’d apply the credit memo to the invoice.

      A better variation on this approach would be to think of deposits as “contra A/R” instead of a liability. In effect, an A/R account that has a credit balance is a liability. That would avoid cluttering your vendor list. With this approach, you create a item that puts the debit into either a bank account or undeposited funds. Then, when you receive a deposit, simply create a credit memo for the deposit and apply it when you create the invoice.

      The first approach has the benefit that deposits appear as a liability on the balance sheet (since they’re in the A/P section), which some prefer. With the second approach, deposits appear as a reduction in an asset (your A/R). Unless that distinction is important to you, I think the extra work of the first method is not worth it.

    • Hi

      We have created two accounts for a customer named as A USD a/c. and A EURO a/c.
      Now want to adjust an advance payment received in USD against A EURO a/c.. But QB (online essentials version) showed an error “The currencies of your account and customer/supplier must be same”. Please let me know how to fix it.

      thanks

      • Chief Mechanic says:

        You can’t do that. You can only enter transactions for A EURO a/c in the currency used to set up that customer, which presumably is the Euro. If you received an advance payment from that customer in USD, you need to enter it using A USD a/c.

  10. Rajesh Ramachandran says:

    Hi, we are using QuickBooks Enterprise solutions 10.0 with multi-currency option. I wanted to open a new quick books with the present ledger’s (Vendor) currency. How it can be done? When I done the currency was showing in the home currency not the foreign currency.

  11. Tricia Love says:

    Hi – We are running QuickBooks Enterprise v12 in the US. We are opening a subsidiary in Canada. The Canadian Sub will need to operate in CAN$. Can you provide guidance on how we should approach the set up of the Sub and consolidated financial reports? Thanks!

    • Chief Mechanic says:

      Consolidated financial reporting for a multicurrency firm is always complicated, so you should check with your CPA for specific guidance, but here are a few options to consider.

      Option #1: The US parent uses its own QB company file where the USD is the home currency, and the Canadian subsidiary uses a separate company file where the CAD is the home currency. This option makes record keeping in the Canadian subsidiary simple, but requires that consolidations be done manually or using an extra-cost 3rd party tool such as Qvinci.

      Option #2: Accounting for the US parent is the same as Option #1, but the Canadian subsidiary uses the USD for its home currency but conducts most business in CAD. This makes consolidations between the parent and the subsidiary much simpler, because both use USD, but day-to-day accounting for the Canadian subsidiary becomes more complicated.

      Since consolidations are done infrequently and the impact on day-to-day accounting efficiency is very regular, Option #2 can be dismissed in most circumstances. Since QB ES can’t do multicurrency consolidations out of the box, you’ll have to be prepared for manual work when you need to prepare consolidations or explore 3rd party tools to make consolidation simpler. As always, you want to pay close attention to intra-company transactions, especially across currencies, because these are likely sources of consolidation trouble spots. If there are very few intra-company transactions (and preferably none), and if the end of period assets of the Canadian subsidiary are small, then the manual consolidation work of Option #1 won’t be too burdensome.

      • Tricia Love says:

        Thank you very much for your thoughts and insight. I appreciate that you took the time to answer and to provide a couple of options.

        Tricia

  12. Just a point that might be interesting for some viewers. The transfermate.com website offers a free alternative to using your bank. It offers better exchange rates, lower fees. You can also view live and historic exchange rate graphs and tables.

    no harm in mentioning as I’m sure there are a lot of people not happy with the way their bank handles their international payments.

    • Chief Mechanic says:

      Likewise, there’s no harm in mentioning that you are affiliated with transfermate so one has to take that into consideration when evaluating your recommendation.

  13. I need help for my Quickbooks 2006.

    Question : I cannot change the currency into PHP it has been disabled. even if I’m using Single user.
    Please help me to answer my problem.

    Thanks,

    • Chief Mechanic says:

      It sounds like you are using a non-US version of QB, so we’re not going to be able to help. Multicurrency features have only been in QB since 2009, and at this point, only QB 2010 and beyond is supported.

    • Ariel, I think you have entered transactions in that account for which you like to change the currency. Now if you want to change the currency to PHP first you will have to delete all the transactions in that account & then re-enter all those transactions back again.

  14. I use QB Enterprise and my company activities are in multicurrencies(USD, NGR) My home currency is USD How do i keep ledgers for my P& L items in foreign currency (NGR)
    How do i keep account for the sales taxes(VAT &WHT ) in foreign currencies

    • Chief Mechanic says:

      P & L’s in QB are in your home currency, which in your case would be USD. Sales tax items are calculated as a % and are not associated with a currency. When you invoice a customer, your line items are in the currency for that customer. Therefore, if you have a customer set up in NGR, all transactions, including sales tax, will be in that currency.

  15. John Ellis says:

    I am thinking of going online with the QuickBooks Online version. Are there any significant differences from the desktop versions which I am familiar with. I am particularily interested in the multicurrency functionalilty.

    Your comments and thoughts would be most welcome.

    • Chief Mechanic says:

      Multi-currency functionality has come more recently to the online version than the desktop one. Desktop software has had multi-currency since QB 2009 (announced in fall 2008), but the online version only got this feature in feature improvements rolled out in 2012. Generally speaking, the desktop version has been more feature rich than the online version and new features arrive sooner in the desktop world. Therefore, if you anticipate that you’ll be a demanding multi-currency user, the desktop product might be a better fit. If multi-currency is a small part of your business, the online edition will likely be fine. If you have a specific need or feature, it’s easier to comment on the existence or the functionality of it in the different products.

  16. We just installed Quickbooks Pro 2010. Our Windows operating system is Chinese system, in the company setup in QB, we cannot choose multi currency. Is that because the Chinese Windows system doesn’t support Quickbooks?

    • Chief Mechanic says:

      We can’t say for sure, since we only use US QB versions on US versions of Windows. QB 2010 is still supported by Intuit until May of this year, so you can check with Intuit directly.

  17. Erika Beck says:

    I am just starting to use QuickBooks enterprise for a regional office in the Phillipines. My default currency is US$. Do I have to enter the budget in the foreign currency (PHP)? Or can I enter the budget into US$ – Would QuickBooks then try to convert the US$ into US$?

    • Chief Mechanic says:

      Budgeting is done in your home currency, USD. That’s true even if you opt to budget for a name that uses a foreign currency, such as a customer assigned a foreign currency. That may seem strange, but the budgeting tool in QB hasn’t received the multicurrency polish of other aspects of the program.

  18. We recently started using qb 2013. We invoice in two currencies usd and local currency which is kenya shilling. The problem I have is that qb asks you to enter an exchange rate when the customer pays you which is usually by cheque. The cheque itself takes 3 days to clear so I wont have an exact exchange rate at that time. Also when the money in usd is credited to my bank account I may take up to two weeks before i change the usd to kenya shillings and by that time the exchange rate would be different. So how will i go around this?

    • Chief Mechanic says:

      If the exchange rate on the customer payment is not the one on the date of deposit but rather the date the check clears the bank, you’ll need to edit the payment with the updated exchange rate once you learn that information.

      Transferring funds from 1 bank account to another will be a separate transaction that will have it’s own exchange rate. See Banking->Transfer Funds. You’ll always have to enter 2 exchange rates (and later edit 1 of them, the one for the customer payment), but if you can’t lock in an exchange rate when you close a transaction, that’s typical for multicurrency transactions.

  19. Hello Chief Mechanic,

    I need help regarding entering opening balances in different currencies.

    Currently I am using the Quick Books Pro 2012 UK version. I am dealing with different currencies such as EURO’s US $ other than GBP.

    However when I create a new customer whom I deal in a foreign currency I am unable to enter the opening balance on that currency.

    So could you please tell me another method to do this?

    Thanks in advance

    • Chief Mechanic says:

      All of our articles are based on the US version of QB. We don’t work with the UK version. But accounting concepts are the same the world over, so let’s consider your question generally. For an existing business that has been using QB (or any accounting software) for some time, new customers should be created with a zero balance. Customers generate balances through economic activity, and if they have a balance, that means something wasn’t recorded in your accounting system. For existing businesses using QB, you record your new customer balances by recording transactions, such as an invoice. If you are switching to QB from another system and you need to set up your customer balances, one common technique is to record those balances using general journal entries, where you debit A/R and credit an equity account. Some prefer to set up a QB item that points to an equity account and record the opening balance using an invoice for that item. Both methods work. But again, this is for firms that are switching to QB, not established businesses that have been using QB. If that’s your situation, you should record your economic activity using transactions such as invoices.

  20. Hi,

    My company home currency is PKR. but our invoices are in SAR, US Dollars, Euros etc. We have two bank accounts of our company in Pakistan. One in PKR & other in Dollars. We received our invoices amount mostly in our US Dollar Bank A/c. For Example, Our Invoice amount is 50000 SAR. Out of 50000 SAR we receive 28000 SAR in Cash and remaining 22000 SAR equivalent amount in Dollar Bank A/c. What is the accounting entry then.

    • Chief Mechanic says:

      If I understand your question correctly, your customer that you invoiced in SAR pays a single invoice in both SAR and USD. That makes more accounting work for you, because a customer is assigned a single currency. There are different ways to do this, but I recommend setting up a clearing bank account in the currency of your invoice. Then, I’d record the 50000 SAR payment, but deposit it to your clearing bank account, not one of your 2 actual bank accounts. With the funds in your clearing bank account, I’d record a transfer of 28000 SAR to your actual SAR bank account and a transfer of 22000 SAR equivalent in USD to your actual USD bank account. Your clearing bank account after each transaction should have a zero balance. With this method, both actual accounts end up with the correct amounts and only reflect the actual transactions, so your bank reconciliations should be straightforward.

  21. Hello i have a problem i am in Colombia and i buy products from the US and i have all my us suppliers on the vendor section as USD currency so when i buy anything i enter the cost in US and QB automatically converts to home currency using the rate i give them on the bottom of the bill. But i do have some stores and i treat them as my regular customers and when i bill them i want to charge just the cost of each item (whatever it cost me when i bought) and i created a price level called cost so when i chooes this price level it bills my stores (customer) in USD and not COP as it supposed. Lets say a LCD plasma costs me 1000USD and exchange rate when i recieved that item was 100 COP then cost in COP should be 100.000 and when i biill customers marked with te cost price level it should show 100.000 COP but it shows 1000 in the price instead the original cost in USD and i want the price to charged in the equivalent COP ammount, what can i do to fix this issue? can u help me please?.. Thanks!

    • Chief Mechanic says:

      Said, we’ll try to help. First, double check that you have applied your “cost” price level to each customer to which you want that price level to apply. Edit the customer and look on the Additional Info tab of the customer information. Your custom costs in COP won’t apply unless the customer is assigned the “cost” price level. Second, QB will invoice in COP, but it won’t be invoicing your actual cost. Instead, it will be invoicing based on the custom price level. Therefore, if your cost for an LCD changes, your customer will never see that changed cost unless you manually update the price level. Instead, your customer will see something closer to what accountants call a standard cost, and that is what your price level will represent. If you want to invoice your customers for your actual costs, search on our site for the term “reimbursable expenses” (without the quotes). Those articles will give you options for invoicing your customers your actual costs. QB will convert your actual USD costs to COP. You may find it adds a few steps to your invoicing process, which may or may not be worth it if your actual costs don’t vary much.

      Hope that helps.

  22. I’m trying to enter customer payment in foreign currency, but customer invoice is in home currency. Can I do this in QuickBooks Pro 2012? or how can I enter this transaction?

    • No, unfortunately you can’t. In QB using multi-currency, a customer is assigned a single currency and all transactions for that customer have to be in that currency. Generally speaking, it’s a good business practice to get customers to pay in the same currency that was used on the invoice. In this instance, you could create a second customer account in the foreign currency and generate an invoice on the same date as the original invoice in your home currency. The amount would be whatever amount of the foreign currency on the original invoice date that it takes to equal the amount of your home currency, even if that is more or less than the amount paid. Then, you’d enter a credit memo on the original invoice date in the original customer account for the amount of the original invoice. That would have the effect of reversing the original invoice and putting the A/R balance in the new customer account that uses the foreign currency.

      Next, you’d record your customer’s payment in the foreign currency. If it’s different from the invoice amount, you should write off that balance as an exchange gain/loss. In essence, that gain/loss is the foreign exchange gain/loss you produced by invoicing in your home currency but allowing the customer to pay in a different currency.

      Hope that helps.

      • Chief Mechanic, can you please help me with my query.

        I am posting home currency adjustment at year end, e.g. Dr Creditor Cr Exchange Gain.

        Every week I generate the ‘unpaid bills report’, and I have noticed that the home currency adjustments are being included in the report, showing balance in home currency amount and zero as foreing amount, as for the system such entry was not paid/settled. In fact when I open ‘Pay Bills’ the entry is there with zero foreign balance, however system does not allow me to tick that particular entry.

        Is there a way how I can set off such entries so that they are shown as cleared both in the ‘Pay Bills’ and ‘Unpaid Bills report’?

        • Chief Mechanic says:

          Kristian – I’ll need more information to clarify what you’re seeing. What version and release of QB are you running? You say you are posting home currency adjustments at year end, but they are showing up on the weekly Unpaid Bills report. By default, the Unpaid Bills report shows foreign balances in the home currency based on the transaction date when the transaction was recorded. Because the report is using exchange rates as of the transaction date, home currency adjustments don’t impact that report.

          You can modify your Unpaid Bills report to show the exchange rate and the foreign open balance by clicking on the Customize Report… button, visiting the Display tab, and checking off these columns in the list. They’re near the end of the list. With that data displaying on your report, you should be able to verify that the exchange rate on the report is the same as that used to record the transaction. Moreover, if the bill has an unpaid foreign balance, that should appear in the “Foreign Open Balance” column.

          Home currency adjustments don’t affect foreign balances, so the fact that you entered a home currency adjustment should not impact your ability to pay a vendor.

          I’ve used that functionality in many versions of QB and just re-tested it in QB 2012, and I haven’t seen the results you’re reporting. Can you confirm you’re working with the Unpaid Bills report?

          • Thanks for your reply. The version of QB I am using is Pro 2006.

            To make my query easier to understand let me give you an example, as it is difficult to explain my query by way of words.

            E.g. At year end I post a home currency adjustment of Euro 1,000 against Sonic (USD Creditor). Every week I run the Unpaid bills report as to be able to pay creditors, and the home currency entry is being shown in such list, even though entry has 0 USD. System is considering that entry as still open, whereas in reality that is just an exchange difference, and hence system should not include that entry in the report. Home currency adjustment is not affecting my foreign balance and neither ability to pay creditor, however I want that such entry is excluded from my report.

            Hope above explanation makes more sense.

            Thanks

          • Chief Mechanic says:

            Yes, that helps. A couple of things:

            1. You say you are using QB Pro 2006. I’m guessing it is not a US version of QB, since multicurrency didn’t come to US QB until 2009. Our comments are limited to US versions of QB, since that’s what we work with regularly. We can still try to help, but you’ll have to realize our comments are only based on our experience with US versions of QB.
            2. In US QB, home currency adjustments never show up on the Unpaid Bills report. In fact, they don’t show up in Vendor Center. Home currency adjustments are general journal entries, and they carry a checkbox that a user can’t modify that marks the GJE as a home currency adjustment. That allows QB to handle home currency adjustments differently compared to a typical GJE. Does your version of QB indicate that a GJE is a home currency adjustment in the journal entry screen? If not, that’s likely to be a big change between US versions of QB and yours.
            3. In US QB, you can apply a filter to the report to change the transaction types that are included. However, home currency adjustments are not a transaction type unto themselves, so IF they appeared (which they don’t), one could exclude them by excluding journal entries. However, this would exclude other journal entries that you may want to appear. Since your version of QB doesn’t function the way US QB does, you may want to explore whether home currency adjustments are their own transaction type that you can exclude from the report. You’d set a filter of multiple transaction types, and check off every type except home currency adjustment.
            4. You’re running a very old version of QB. Intuit has learned a lot about multi-currency support over the years, so it’s likely that there have been many improvements here. You might want to see if you can compare how this works in the latest version. This may be one of the things that has changed, since US QB doesn’t work that way.
          • Thanks for your help Chief Mechanic. I appreciate your help especially as I did not notice that site only dealt with US version.

            I will try to modify the report.

          • Chief Mechanic says:

            Happy to try to help. Let us know how it goes.

  23. I start to use multi-currency feature but I do not know how to post DUE TO amount to Quickbooks, which company transferred fund to other partner company.

    • Can you be a little more detailed in what you are trying to do? What transaction are you trying to enter? Where are you being prompted for DUE TO information? Are the currencies on both sides of the transaction the same? Are they the same as your home currency or different?

  24. I have imported invoice data ifrom an excell file nto a US$ customer account; My home currency is Ja$; But the invoice created shows the amount as Ja$ and not US$.
    I was expecting the invoice to show multiple currencies, that is the transaction amount in US$ and the home currency in Ja$. How can I fix this.

    • Terry – QB has limited transaction import capability, especially when it comes to multiple currencies. We have specialized tools to do transaction imports you described. Without such tools, you can’t accomplish what you want using off-the-shelf QB. If you’d like us to assist you as a paid service, just use our contact form. It will help if you made a backup BEFORE you imported anything, because otherwise those transactions will have to be manually deleted.

  25. Dean Rogers says:

    Hi,

    I am looking at using QB to deal with issues that MYOB seems to have no understanding of.

    QB seems to have all the fundamentals that I would expect but to recommend to a client I need to understand whether QB can import fx transactions e.g. USD customer/vendor/bank transactions for a AUD local currency. The basic imports transactions types listed in the help do not seem to cover fx.

    The implementation will require posting 1-2 years of history (that MYOB has made a mess of) so it isn’t really possible to do manually.

    cheers,
    Dean

    • Dean – Your question is more fundamental than foreign exchange. It really deals with transaction import in QB. QB on its own does not do transaction import. We have tools that enable us to import transactions, and those tools do support foreign exchange. However, bulk importing foreign exchange transactions can lead to problems. You’d need the exchange rate used on each transaction, and that is often not recorded. If it was not recorded, converting foreign balances to another currency won’t be accurate, so you’d need to make adjustments on whatever frequency you need to preserve the accuracy of your financial statements. If you’d like to hire us to do the import, just drop us an email.

  26. 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.

  27. 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.

  28. 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.

  29. 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.

      • Ben Dipzinski says:

        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.

  30. 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?

  31. 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.

  32. 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.

  33. 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?

  34. Rob Herrera says:

    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.

  35. 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.

  36. Peter Maksymiw says:

    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.

    • QuickBooks Pro 2012
      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 CREDIT for the prepayment on January 1st , exchange rate USD1 = CNY 6. 1
      2. We receive bill on February 1st. and pay the bill from above CREDIT, exchange rate USD1 = CNY 6. 2

      Then , I find the exchange gain between 6.1 &6.2 would back to prepayment transaction , but , on Feb 1st , Jan book has been closed , it should not change the entry of Jan . could you advise how to solve this problem ? Thanks very much

  37. 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.

  38. 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,

  39. Lester Greenberg says:

    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.

  40. 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.

  41. Do any of you guys know where/what is the download link for the QuickBooks software?

    Thanks for the reply.

  42. 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?

  43. 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?

  44. 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.

  45. 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.

  46. 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.

  47. 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.

  48. Roger Avent says:

    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.

  49. 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:

      Revenue and expense transactions shall be translated in a manner that produces approximately the same dollar amounts that would have resulted had the underlying transactions been translated into dollars on the dates they occurred. Since separate translation of each transaction is usually impractical, the specified result can be achieved by using an average rate for the period.

      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