Software: MoneyWorks accounting software
When your home currency is set to SGD (Singapore dollar) and you need to make an advance payment (deposit) to your foreign supplier (USD) on an order. How to record this transaction?
First, you need to create a deposit account and this account needs to be a Current Asset type of account. Note: since your home currency is set to SGD, so Current Asset account type will be in SGD. You can only create Bank, Accounts Payable and Accounts Receivable in foreign currency.
Next, you need to add a new product item “Deposit” and associate this item to your newly created “Deposit” account.
When you create a Purchase Order to your supplier in USD currency, you can select “Pay deposit for order” from the Process Order field.
In my example, when I make a deposit of US$10,000.00 at the exchange rate of 1SGD:0.75USD; in my Balance Sheet, Deposit account will show as S$13,333.33.
User need not worry about what exchange you used at the deposit stage, when you converting your Purchase Order into Purchase Invoice, MoneyWorks knows that a Deposit of US$10,000.00 was paid. This deposit amount will be automatically less off from your Purchase Invoice and exchange rate will be taken care of. Hence, Accounts Payable amount will be reduced.
Now, if you view your Balance Sheet again, S$13,333.33 in the deposit account will be automatically reversed.