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How to correct the home currency value for foreign bank account closing balance? Thank you.

I am using QB Pro 2014 multi currency version. Home currency is HKD. 

I have a JPY S/A bank account.

The year beginning balance + the year total deposit - the year total withdrawal = The year-end closing balance (a positive figure) = bank statement. But the Home currency value for The Year beginning balance + the year total deposit - the year total withdrawal = The year-end closing balance = a negative figure.

I cannot figure out why the foreign balance is a positive figure but the home currency value is a negative figure.  I did not do the year-end adjustment for JPY to home currency value at the last year-end and this year-end yet.  Is this the possible reason to have this result ?

How and what can I do to correct it?  Can I adjust the last year-end home currency value after the ending of the last year?  Thank you very much for your help!

Solved
Best answer 12-10-2018

Accepted Solutions
Community Contributor *

The apparent discrepancy is the result of changes in the...

The apparent discrepancy is the result of changes in the exchange rate during the year, and transactions that are not recorded at the actual exchange rate at the time of the transaction.  Failing to enter the home-currency adjustment at year-end is one contributing factor.  Note that this apparent discrepancy is just a result of doing business in multiple currencies at fluctuating exchange rates - it is a natural consequence, it is not an error.  The year-end home-currency adjustment records the result of the differing exchange rates - a gain or loss.

At a minimum, a home-currency adjustment should be recorded at every year-end.  Failure to do this may result in misleading financial and tax reports, and errors in tax payments.  For some businesses it may be desirable to record a home-currency adjustment more often - quarterly, monthly, immediately following an unusually large transaction, or on some other criteria unique to your business.  

You should discuss this with your own professional accountant to help determine the best course of action with respect to the previous year-end currency adjustment, the current year-end adjustment, and the most appropriate timing of adjustments between year-ends.

11 Comments
QuickBooks Team

Hi @m.hui, Let's see if our AllStars @Safari818 and @qbt...

Hi @m.hui,

Let's see if our AllStars @Safari818 and @qbteachmt might be able to help with this. They've been extremely helpful before with questions about home and foreign currencies.

Community Contributor *

The apparent discrepancy is the result of changes in the...

The apparent discrepancy is the result of changes in the exchange rate during the year, and transactions that are not recorded at the actual exchange rate at the time of the transaction.  Failing to enter the home-currency adjustment at year-end is one contributing factor.  Note that this apparent discrepancy is just a result of doing business in multiple currencies at fluctuating exchange rates - it is a natural consequence, it is not an error.  The year-end home-currency adjustment records the result of the differing exchange rates - a gain or loss.

At a minimum, a home-currency adjustment should be recorded at every year-end.  Failure to do this may result in misleading financial and tax reports, and errors in tax payments.  For some businesses it may be desirable to record a home-currency adjustment more often - quarterly, monthly, immediately following an unusually large transaction, or on some other criteria unique to your business.  

You should discuss this with your own professional accountant to help determine the best course of action with respect to the previous year-end currency adjustment, the current year-end adjustment, and the most appropriate timing of adjustments between year-ends.

Not applicable

Thank you for your advice.  What is the steps I need to d...

Thank you for your advice.  What is the steps I need to do if I want to adust the last year end home currency value and this year home currecny value?  Thank you.
Community Contributor *

My personal method is as follows: Display the balance she...

My personal method is as follows:
Display the balance sheet and note the home-currency value as it is now. Calculate the correct home-currency value according to the appropriate exchange rate, and the difference from the balance sheet.  Make a home-currency general journal entry to the bank and the Foreign Exchange Gain/Loss account.  Do this first for the previous year end, then for the current year-end.

As I noted previously I recommend that you discuss this with your own professional accountant to ensure the entry for the previous year-end does not result in discrepancies with previously published reports and previous tax returns.
Not applicable

Thank you very much for your valuable method and advice....

Thank you very much for your valuable method and advice.  I will try first.  Thank you for your kind support.
Community Contributor *

You're welcome.

You're welcome.
Community Contributor **

Just to add a little to Safari's suggestion.   My home cu...

Just to add a little to Safari's suggestion.  
My home currency is HKD but I have Amazon accounts in CAD, EUR, GBP and USD.  I can reconcile the year end holdings in each foreign currency by getting the statement from Amazon, however, the balance sheet at year end in HKD shows a variance and needs to be adjusted to reflect the exchange gain/loss from Amazon.

When I initially tried to make a journal entry that only affected the home currency I couldn't because by virtue of selecting the bank this also meant that any entry affected the CAD balance (reconciled, no need to adjust) AND the HKD valuation.  

A quick call to QBO provided a neat hack which is to create the journal entry in your home currency, select the foreign currency bank but assign the currency exchange rate to 999999 (on this transaction only!) which will have the effect of debiting (or crediting) to the exchange gain / loss account the amount in HKD but not affecting the bank balance in the foreign currency since it would take 999999 movement in HKD to adjust the CAD value by 1.

Bugs..
Not applicable

Very inconvenient. Why not to fix this making the balance...

Very inconvenient. Why not to fix this making the balance calculation not by the tranactions summarizing, but by current date exchange rate?
Not applicable

Should the year end currency conversion adjustment be rev...

Should the year end currency conversion adjustment be reversed at the beginning of the next fiscal year?
Community Contributor *

Optional.  I usually don't bother.

Optional.  I usually don't bother.
Established Member

Re: The apparent discrepancy is the result of changes in the...

In Quickbooks Desktop go to MENU > Company > Manage Currency > Home Currency Adjustment. 
Select DATE and CURRENCY. Click on CALCULATE ADJUSTMENT. If relevant transactions are on record table will come up with accounts to adjust.
Check affected account and SAVE. See your new account balance. 

 

Note: You will get empty output on table if foreign currency account balance (not USD balance on foreign account)  is zero at selected date. In such case just change date according to some non-zero balance.