How Can I Transfer Funds Between 2 Bank Accounts Maintained In Different Currencies?

QuickBooks 2009 and Enterprise Solutions 9.0 (and later) support transactions in multiple currencies. Each account, customer, and vendor has an associated currency. Multi-currency support in QB does not extend to employees.

Therefore, when you set up a bank account, you’ll specify the Currency used for that account, as shown below.

In a company file (.qbw) that has already been set up to use multiple currencies, set up each bank account with the single currency in which the account is maintained.

To transfer funds from 1 bank account in 1 currency to another bank account in another currency, there are 3 basic methods:

1. Create a vendor for the foreign bank and write a check to that vendor where the account is the foreign bank itself
2. Use the Transfer Funds function
3. Use a General Journal Entry

See our related article for more information on recording gains and losses on funds transferred to a foreign bank account.

Method 1 – Create a Vendor for the Foreign Bank and Write a Check

Create a Vendor for the bank account that will receive funds, and be sure to include the currency in which the account is maintained.

Next, simply write a check from the account denominated in 1 currency (the Bank Account in USD below) to the Vendor whose records are maintained in the currency of the account receiving the funds (British Bank below). On the Expenses tab, set the Account to the bank account receiving the funds.

Method 2 – Use the Transfer Funds Function

First, make sure you have already created both bank accounts – the bank account that is the source of funds and the bank account that will be the recipient of funds.

Open your General Ledger Chart of Accounts by clicking on the menu selection Lists->Chart of Accounts or using the keyboard shortcut Ctrl + A. Click once on the bank account that will be the source of funds. Be sure to click just once to select the source account, because double clicking will open a register for that account. If you don’t select the correct account, you’ll have a chance to review and correct the account selection before making the transfer.

With the source account selected, right click on the source account to invoke the context menu. Chose Transfer Funds from the context menu.

The Transfer Funds Between Accounts window will allow you to transfer funds between 2 bank accounts. Verify that the source bank account – the one providing the funds – is selected in the Transfer Funds From pulldown and that the recipient bank account – the one receiving the funds – is selected in the Transfer Funds To pulldown. Until you select a recipient account in a currency other than your home currency, the Transfer Currency will be set to your home currency, and you won’t be able to change it. Once you select a recipient account in a foreign currency, you can record an amount to transfer either in that foreign currency or your home currency – QuickBooks will automatically do the conversion for you. Unfortunately, you can’t transfer funds between 2 accounts, both of which are maintained in foreign currencies.

Enter a Memo for the transfer and click either Save & Close or Save & New. According to Intuit as discussed in this Intuit knowledge base article, because of a product limitation in QuickBooks the Memo for the recipient account is not set to the value entered on the Transfer Funds Between Accounts window when viewed on reports such as the Custom Transaction Detail Report. However, our own tests on QuickBooks 2009 don’t confirm this behavior. QuickBooks correctly sets the Memo field on both the source and recipient (target) accounts, and the Memo correctly displays on the Custom Transaction Detail Report.

Once the transfer is recorded, it will appear in the registers for both bank accounts as a TRANSFR transaction type. Here’s the register from the foreign bank account after recording the transaction:

It’s always important to remember that QuickBooks will use exchange rates on file in QuickBooks before you record the transfer. If there’s no exchange rate recorded in QuickBooks at all for the 2 currencies involved, the exchange rate will be set to 1:1 unless you manually enter a new Exchange Rate in the Transfer Funds Between Accounts window before recording the transfer. If there is an exchange rate for the 2 currencies involved as of an earlier date, QuickBooks will use that exchange rate unless you manually enter a new one.

The Transfer Funds function is not unique to company files with multi-currency enabled or to transfers exclusively between bank accounts. With or without multi-currency enabled, you can use the Transfer Funds function to transfer funds between any 2 accounts.

One small advantage this second method offers is that it doesn’t require adding a Vendor to transfer funds between accounts, although in many cases you may have other reasons to create a vendor for a bank account, such as recording bank charges.

For those using or planning to use third-party addons for QuickBooks, the Transfer Funds function has an important limitation. Many third-party addons use the Intuit Software Developers Kit (SDK) to access QuickBooks data, and versions of the SDK up to 8.0 do not provide access to transfer transactions. For example, a custom report built from QuickBooks data gathered using the QODBC driver would not have access to transfer transactions, since the QODBC driver itself can’t access those transactions in QuickBooks. If transactions were recorded with this method, a custom report that relied on this information would be incomplete and inaccurate. Of course, if you don’t plan to use any addons or extract data from QuickBooks, this limitation is irrelevant, because the QuickBooks program itself can display and report on transfers.

Method 3 – Use a General Journal Entry

Another direct method is to use a general journal entry to accomplish the transfer. The account receiving funds is debited, and the account providing funds is credited.

When using this method, it’s important to understand an important limitation: the Currency of the general journal entry must be the Currency of the foreign bank account. Likewise, since most exchange rates in QuickBooks are expressed as a conversion from a home currency to a foreign currency, the exchange rate for a general journal entry is the reciprocal (i.e., 1 divided by the normal exchange rate) of the normal exchange rate.

Through QuickBooks 2010 release 5, general journal entries recorded in the home currency would incorrectly record home currency units in the foreign bank account – instead of converted home currency units.

Because of these limitations, this method is only recommended for advanced users exercising care when recording the transfer.

(+1 rating, 5 votes)

Loading...