Software: MoneyWorks accounting software
If your company needs to trade in multiple currencies, when you were sourcing for accounting software, one of the most common questions you usually asked will be “How does the multicurrency feature works?”
So, how about MoneyWorks? How does its multicurrency works?
If my Home currency (SGD) against USD (foreign currency) was set to “0.80USD : 1SGD”; and I recorded a Purchase Invoice for the amount of US$10,000.00, the double entry for this transaction will be:
Debit: Purchases: 10,000.00
Credit: USD Account Payable: 10,000.00
Debit: Purchases: 2,500.00
Credit: USD Accounts Payable (Currency delta): 2,500.00
Note: “Currency delta” is a systems account, which use to capture the exchange differences.
Next, when there was a change in exchange rate for “USD : SGD”, from “0.80USD : 1SGD” to “0.85USD : 1SGD”, MoneyWorks automatically created an Unrealised Exchange Gain/Loss journal:
Debit: USD Accounts Payable (Currency delta): 735.29
Credit: Exchange Gain/Loss – Unrealised: 735.29
In this case, the exchange rate was in your favour, Accounts Payable account was dropped by S$735.29 and caused a gain in the Exchange Gain/Loss – Unrealised account.
When the payment of US$10,000.00 was made from your USD Bank account, the double entry will be:
Debit: USD Accounts Payable: 10,000.00
Debit: USD Accounts Payable (Currency delta): 1,764.71
Credit: USD Bank Account: 10,000.00
Credit: USD Bank Account (Currency delta): 1,764.71
Credit: Exchange Gain/Loss: 735.29
Debit: Exchange Gain/Loss – Unrealised: 735.29
1, 764.71 was being transferred from USD Accounts Payable (Currency delta) to USD Bank Account (Currency delta) system account, as this amount will not be realised until it is physically withdraw from USD BANK.
Besides, 735.29 were realized here and amount was being transferred from “Exchange Gain/Loss – Unrealisd” to the “Exchange Gain/Loss account”.