Presentation on theme: "An in-depth look at QuickBooks Multi-Currency functionality."— Presentation transcript:
1An in-depth look at QuickBooks Multi-Currency functionality. Session will emphasise how to understand Multi- Currency reporting and how to avoid the common pitfalls.
2MultiCurrency Functionality This presentation will Cover:Brief Overview on the setting up of Multi CurrencyCover Topics specific to Making adjustments, the setting up, and the understanding of reportsRules for MulticurrencyBalancing Sub Ledgers to Balance SheetWish listQ&A
3MultiCurrencyDuring the presentation we will be using a sample file, “QuickBooks Multicurrency File”The presentation will cover Functionality of Multicurrency rather than how to set upFor this presentation we will be working with examples of Foreign Currency Accounts Receivables in US$File & Notes will be available to download from Quicken Website
4Brief Overview on setting up for MultiCurrency Multicurrency is only available from QuickBooks Pro and upOnce turned on, Multicurrency cannot be turned offThis is my interpretation based on my experience in using Multicurrency
5Multicurrency Set UpEdit: Preferences> Accounting> Company Preferences Tab> Tick USE MULTICURRENCY.Choose Home currency> New Zealand DollarNote: Once turned on Multicurrency cannot be turned offThe Tick box Use foreign prices on items gives you the ability to create a fixed foreign price for any items sold. The foreign price is used in foreign transactions that match the currency selected in the Use foreign prices on items preference. (You can only have one foreign item currency)This allows for a foreign sales price to be recorded in the item info as well as NZ$. This preference can be turned on or off at any time.
6Multicurrency Set UpOnce Multicurrency is turned on the Currency List is available under Lists > Currency ListThis is where you update the default Exchange rate for your active currencies.There are many currency converter websites and I tend to use Make sure you convert the foreign currency into NZDOnce Multicurrency is turned on:Each transaction will now have an additional field in order to enter exchange rateFor each Supplier &/or Customer using a different currency QuickBooks requires a matching Accounts Payable &/or Accounts Receivable account to be created first linked to the appropriate foreign currency. You cannot change the Currency set to the Customer/supplier once used.Foreign Currency Bank accounts will also need to be created if the client uses one.QuickBooks also adds an expense account called “Exchange Gain/Loss”, this is where QuickBooks posts any realised currency exchange gains or losses
7Multicurrency Set UpExpense account created when multicurrency is turned on "Exchange Gain/LossRegister balance displayed in Foreign CurrencyCustomer Centre amounts displayed in Foreign CurrencyCurrency & Exchange Rate Box
8When does Exchange Gain/Loss record on transactions Transfer To/From AUD Bank to Foreign Bank DOES NOT create a Gain/Loss. This only revalues the foreign Bank Account for Balance Sheet.This example I have transferred 10,000 USD from NZD Bank To USD Bank using the NZD currency in Transfer Currency Box and the revaluation of the US Bank Account is using the exchange rateCreating Credit Notes or Applying credits In AR & AP DOES NOT create a Gain/Loss. It uses the Exchange rate for revaluation into AUD for Balance SheetEnter Bills & Invoices DOES NOT create Gain/loss. It uses the Exchange rate for revaluation into NZD for Balance Sheet
9When does Exchange Gain/Loss record on transactions Receive payments, Pay Bills create an exchange Gain/Loss. Even if you create a transaction in a foreign currency and pay or receive money into Foreign account. It is recording the difference between the exchange rate on original transaction as opposed to payment rate. If you do not want to record an exchange variance then use the same rate for both transactions.GST rounding on Foreign Transactions (0.01) will be booked to Exchange Gain/Loss accountExchange Loss $13.37Invoice raised $US 1,650 incl NZ$916.94Partial Payment received $US NZ$903.57Difference = Exchange Gain/loss Gain $13.37
10Rules For Multicurrency Do not change exchange rate on an Invoice or Bill that has payments applied.This will create a discrepancy (value of Change) in the NZD$ balance. As the exchange Gain/loss calculated with the payment remains unchanged the Gain/loss is now incorrect. To fix this requires a Home Currency adjustment or to force a revalue of the exchange gain/loss by opening payment, untick invoice paid and then retick.Do not change the Exchange rate on a bill recording inventory item.This will change the AVERAGE cost for the affected item as it revalues the transaction. This will change balances on Balance Sheet (Inventory asset) and Profit & Loss (Cost Of Goods Sold) if the item has been sold.Do not leave unapplied payments & Credit Notes.This causes discrepancies in the reports and to the calculation of the Exchange Gain/loss. If possible use the same exchange rate for Credit notes as the original transaction.
11Rules For Multicurrency Think about using Fixed Monthly Exchange rates per each month.This will make it easier to keep track on the accuracy of rates used on each transactionCalculate the exact Exchange rate when money is actually paid into or out of NZD BANK account.The Exchange rate to use in this scenario is the actual as per bank statement. To calculate to the correct decimal places in order to match the bank statement, use the windows calculator. Divide the Foreign amount into NZD eg NZD$$ / USD$$ = Exchange rateExchange Rate not changing to current Rate when converting Sales Orders into Invoices.When Purchase Orders are converted into Bills the Exchange rate updates to the default Rate, this is not the case with Sales Orders. When SO are converted into Invoices the rate remains the same as SO rate. You are required to remember to update the Rate.
12Rules For Multicurrency GST reporting incorrectly on Foreign Currency transactions with TAX CODES on Tax Reports.Tax Summary ,Tax detail & GST 101 reports display the total tax column $value incorrectly when a Tax code (S) is used in a Foreign Currency transaction and there is an Exchange rate change. It keeps the original NZD GST converted rate and only updates the net. Only affects Tax reports and not General ledger. Reports affected are all BAS Engine Reports. Eg. Tax Summary, Tax detail, BAS Engine. The Fix is to delete the tax code, tab and re enter Tax code for each line on transaction, RE SAVE. Only affects Foreign Currency transactions with Tax codes.
13Balancing Sub ledgers to Balance Sheet AR & AP ledgers need to be balanced to the Balance Sheet periodically (at least at End of Year)In this scenario we are looking at Accounts receivable ScenarioUS$ scenario Customer (USD$)US$NZ$RateBal US$Bal NZ$Exchange Gain/Loss1. 16/02/10 Invoice Raised US$3,3003,300.004,722.301.431-1. 02/03/10 Adjustment Note Raised US$495495.00700.471.41512,805.004,021.831. 12/03/10 Partial Payment received US$ 2,0002,000.002,783.001.3915805.001,159.831. 14/03/10 Balance of payment received US$8051,120.167.881. 31/03/10 Home Currency Balance Adjust to clear $2. 01/05/10 New Invoice raised US$1,6501,650.002,327.622. 02/06/10 Partial Payment received US$650650.00903.571.3901Balance on 02/06 is US$1,000 NZ$1,410.68
14Balancing Sub ledgers to Balance Sheet Reports to set up to check balances:1. Customer Balance Detail Report: REPORT TO CONFIRM BALANCE OUTSTANDING in Foreign Currency AT A PRTICULAR DATE back in time**MUST enter correct From & To Dates taking into account date of oldest transaction outstandingCustomer Balance Detail Report: Modify: DisplayUn tick Amount & BalanceTick: Open Balance, Actual Rate, Currency, Foreign Balance Advanced Tab: Open Balance/Ageing Reports at REPORT DATE Modify: FiltersAccount: Multiple accounts: Choose the AR-Foreign accountModify: Header/Footer: Rename Header by adding Currency
15Balancing Sub ledgers to Balance Sheet 2. Customer Balance SummaryModify: FiltersAccount: Multiple accounts: Choose the AR-Foreign accountModify: Header/Footer: Rename Header by adding Currency3. A/R Ageing Summary
16Balancing Sub ledgers to Balance Sheet 4. Customer Open Invoices **Designed to display outstanding customer balance in NZD$ & not able to accurately display customer outstanding in foreign Currency as it does not take into account adjustment notes & Partial Payments. Modify: FiltersAccount: Multiple accounts: Choose the AR-Foreign accountModify: Header/Footer: Rename Header by adding CurrencyAdvanced Tab: Open Balance/Ageing Reports at REPORT DATEModify: DisplayUn tick Terms, Due Date, AgeingTick: Realised Amount, Actual Rate, Foreign Amount, Currency
17Balancing Sub ledgers to Balance Sheet NZD$0.00-NZ$7.88 due to 7.88 Home currency adjustment
18Balancing Sub ledgers to Balance Sheet Balance of AR US$ in Balance Sheet will equal balance in Customer Summary Report. They show a balance of $7.88 NZD owing due to the discrepancy of the Exchange rate used on the Credit note as opposed to the invoice.Reason for Balance DiscrepancyAdjustment note raised $USUS$ 495NZD$Original Invoice rateNZD$Difference between Invoice Rate & Adjust Note RateNZD$ 7.88
19Balancing Sub ledgers to Balance Sheet The Balance on Open Invoices, Balance Detail reports & Ageing Reports show Zero NZD as outstanding. This creates issues with Auditing as they compare Balance Sheet AR to AR Ageing report. Accountants need to compare Balance Sheet AR to Customer Balance Summary as these two reports should balance.To balance this discrepancy a HOME CURRENCY ADJUSTMENT is requiredMake general journal EntriesTick Home Currency adjustment boxCreate Journal to balance discrepancy to the customer and offset to Exchange Gain/Loss Account.To Revalue Foreign Accounts for end of period adjustments: Decide on the period that is required for revaluation purposesCreate Unrealised Gain & Loss report (Reports> Multicurrency)Choose the Exchange rate for revaluationThe report will revalue the Foreign accounts with the adjustments requiredEnter the adjustment as a HOME CURRENCY ADJUSTMENTAR & AP accounts will require a name to book the adjustment to.I use US$ AR Revalue for AR. US$ AP Revalue for AP.I reverse the revaluation at the beginning of the next periodBook the revaluation to an account Unrealised Gain/Loss Account
20Wish ListNeed the ability to choose Use foreign prices on items for purchasing as well as invoicing. Eg being able to produce a Purchase order choosing Foreign Currency and not NZDNeed Sales Orders to update exchange rate the same as Purchase OrdersUpdate the currency list over the internet
21An in-depth look at QuickBooks Multi-Currency functionality. QuestionsPresented by : Julie Gordon