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Level 1

I invoice a customer in their currency, then they pay in my home currency. How do I process the payment, account for exchange gain/loss, and reconcile my bank statement?

I have a US customer that I invoiced USD253 (CAD 354).  When they paid me it arrived in my CAD bank account converted to CAD320 (USD 233).  I want to mark the payment as fully clearing the original USD 253 amount and record the difference as an exchange gain/loss.

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Best answer 03-11-2019

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Level 3

I don't use QBO, but in the Desktop software you do the f...

I don't use QBO, but in the Desktop software you do the following:

Record the payment as USD253, payment in full (I assume the $20 difference is a bank charge) at the exchange rate 1.26482 (320 / 253) and deposit to your CAD bank.  This will record full payment of the invoice in USD, deposit of CAD320, and the exchange loss of CAD$34.  Technically the USD$20 is a bank charge (about CAD$25.30) and the actual exchange loss is $8.70, but for all practical purposes this distinction is not important and not worth the extra work to record it.

Try it.

View solution in original post

6 Comments
Level 3

I don't use QBO, but in the Desktop software you do the f...

I don't use QBO, but in the Desktop software you do the following:

Record the payment as USD253, payment in full (I assume the $20 difference is a bank charge) at the exchange rate 1.26482 (320 / 253) and deposit to your CAD bank.  This will record full payment of the invoice in USD, deposit of CAD320, and the exchange loss of CAD$34.  Technically the USD$20 is a bank charge (about CAD$25.30) and the actual exchange loss is $8.70, but for all practical purposes this distinction is not important and not worth the extra work to record it.

Try it.

View solution in original post

Level 1

This worked great, many thanks!  I'm not too worried abou...

This worked great, many thanks!  I'm not too worried about separating out the bank charge fee, I can live with that in ex rate loss account.  Appreciate your help.
Level 3

You're welcome, I'm glad it helped.

You're welcome, I'm glad it helped.
Level 2

if you don't have one, create a 'clearing bank' in CAD cu...

if you don't have one, create a 'clearing bank' in CAD currency, type cash on hand
when you receive the payment of 253.00, deposit it to the clearing bank
   using an exchange of 320/233 = 1.3734

your clearing bank should now have 352.07
create a journal entry to
  db chequing account = 320.00
  db service charges 20 * 1.3734 = 27.47
  db exch g/l = 4.60
  cr clearing bank = 352.07


Level 1

Re: I don't use QBO, but in the Desktop software you do the f...

How do you actually process this. As I understand it, you need to set up a vendor in the applicable currency, and invoices will post to this vendor in the applicable currency. If I pay the invoice in another currency, won't I need to set the vendor up for that currency? If so, I will have the vendor listed in currency 1 with an open balance, and a credit in the vendor in currency 2 for the payment. Can I merge the vendor with multiple currencies under 1 name?

QuickBooks Team

Re: I don't use QBO, but in the Desktop software you do the f...

Hi martind,

 

That's a great question and you're absolutely right: in order to have more than one currency associated with a vendor, it would mean setting up the vendor multiple times, therefore creating different vendor profiles. This is true for whether you're using QuickBooks Online or QuickBooks Desktop. There isn't currently a way to set up a vendor or any other account with multiple currencies.

 

Because of that, recording transactions and payments must be done in the same currency. What has been suggested here for customers is to make the transaction out to the customer in their currency and then when recording the payment in their currency, deposit the funds to an account using the currency you want. QuickBooks will automatically do the calculations of the exchange for you.

 

When it comes to vendor payments, choosing the payment account is where the currency exchange would come in. Say you have a US vendor. The bill will be created and calculated using USD. When you make a payment, the payment will also be in USD, but you can choose a Canadian currency account to pay it with. Again, the program will take care of the exchange for you. I've got a few articles here about multicurrency that can explain how it works in the program. Check them out and let me know if you have more questions.

 

QuickBooks Desktop

QuickBooks Online

I hope that helps clear up the process a bit better. I'll be here if you have more questions.