Offset a foreign currency credit note with a local currency invoice

MoneyWorks, like most of the small business accounting software, tag the currency to a name. You have to create as two creators instead of one if a creditor traded with you in both foreign (such as USD) and local currency (SGD).

You can easily offset an invoice with a credit note from the same supplier (or customer) if they are in the same currency. You can either use the contra feature from the command menu or a payment transaction to offset it. However, if both invoice and credit note is in a different currency, then have to consider using a contra account to clear them instead.

Assuming you have:

  • Purchase Invoice from the A Supplier (SGD) with S$6,073.32, and a
  • Credit Note from the A Supplier (USD) at US$260(cr).

First, you create a current liability account (you can use current asset if you preferred) and name it as ‘contra’. Then, create a dummy:

Dummy invocie
  • Credit Note from A Supplier (SGD) with contra account, for S$260(cr); and a
  • Purchase Invoice from the A Supplier (USD) with contra account, for US$260.

Next, use the contra feature (from the command menu > Adjustment) to offset:

  • Credit Note of S$260 with the Purchase Invoice of A Supplier (SGD); and
  • Credit Note of US$260 with the dummy Purchase Invoice from the A Supplier (USD).

I, usually, prefer to use the same document number (maybe add a – behind the reference number to differentiate it) and a memo in the description for audit purpose.