Tag Archives: MoneyWorks multicurrency

Same customer with multiple currencies

Software: MoneyWorks #accounting software

In a multiple currencies environment, every name (customer or supplier) has tagged a currency. For example, if you trade with the customer in US Dollars, you tagged US Dollars currency to the name (under the Pricing & Terms tab) and the US Dollars Accounts Receivable account will automatically insert into the Receivable field.

If you have more than one US Dollars Receivable accounts, such as one for the Trade Receivable and another for Non-Trade Receivable or Inter-Company Receivable, MoneyWorks allows you to preset the Receivable account in the name profile. It posted to the respective receivable account when the name has used in a transaction.

In the General Ledger, the foreign currency account, which can be a Bank, Accounts Receivable and the Accounts Payable type of account are represented by two accounts. MoneyWorks uses the main account, which you have created, to capture the value of the foreign currency and another “Delta” account to store the differences between the value of the foreign currency and the base currency. Unlike those accounts which you have created, the Delta account, which is a system account, is hidden from the accounts list.

Debtors Profile

Since the currency used is defined in the name profile, you cannot change it at the transaction level. Multiple names have to be created if you trade with the same customer in multiple currencies. For example, two names have to be created, one for the US Dollars and another for the Singapore Dollars, if you are trading with the customer in both US Dollars and Singapore Dollars. MoneyWorks will treat them as two separate customers since they are in a different currency.

The Delta account (AccountCode-~~DEL)

Software: MoneyWorks #accounting software

In the MoneyWorks general ledger, a foreign currency account is represented as two separate amounts: the value in the foreign currency, and the value of the difference between that currency and the base currency. The difference is stored in a (normally hidden) account called a “delta account”, so that the following is always true:

Base Currency Value = Foreign Currency Value + Delta Value

— MoneyWorks v7 User Guide Page G272, Multi-currencies: Behind the Scenes

You can keep the bank, accounts receivable and account payable account in foreign currency; and each of these accounts has a Delta account. The -~~DEL account is a system account, which captures the “exchange ratio” of a foreign currency account.

Assuming you record a foreign currency Purchase Invoice of US$5,786.00 in the MoneyWorks accounting system at an exchange of 0.7500USD:1.0000SGD (Singapore Dollar is the Base currency). The journal behind:

Debit 160.100: Inventory Assets account 7,714.67

Credit 230.200: Accounts Payable (USD) 5,786.00
Credit 230.200-~~DEL: Accounts Payable (USD 1,928.67

The foreign currency value of 5,786.00 (account code 230.200) and the Delta Value of 1,928.67 (account code 230.200-~~DEL) added up is the base currency value 7,714.67 (5,786 / 0.75).

The -~~DEL account

 

Reclassifying a foreign currency account after revaluation of currency have done in MoneyWorks accounting software

Software: MoneyWorks #accounting software

MoneyWorks Gold Accounting SoftwareYou recorded a foreign currency Term Deposit of US$100,000.00 with a period exchange rate of 0.72USD:1SGD. When the exchange rate has changed to 0.73USD:1SGD at the period end, MoneyWorks revalue the foreign currency. An exchange journal of debiting the Exchange Gain/Loss account and credit the Term Deposit account of S$1,902.69 passed automatically into MoneyWorks accounting system.

Working:
Original rate: US$100,000 / 0.72 = S$138,888.89
Adjusted rate: US$100,000 / 0.73 = S$136,986.30
Exchange Loss: 138,888.89 – 136,986.30 = $1,902.59

After revalued the currency, you realised that instead of recording the deposit of US$100,000 into a single Term Deposit account, it should be separated into two Term Deposit accounts. That is, US$70,000 for the Term Deposit 1 account and US$30,000 for the Term Deposit 2 account.

Assuming you reclassify the account at the period end via a Fund Transfer method. You transfer US$30,000 from the Term Deposit 1 account to the Term Deposit 2 account at the period end. The journal behind the fund transfer is:

Debit the Term Deposit 2 account 30,000
Debit the Term Deposit 2 ~ Delta account 11,095.89

Credit the Term Deposit 1 account 30,000
Credit the Term Deposit 1 ~ Delta account 11,095.89

Since the exchange rate has changed, the fund transfer will automatically pick up the exchange rate of 0.73USD:1SGD.

Although the amount in the original term deposit account has reduced from US$100,000 to US$70,000, the exchange gain/loss account remain unchanged as the revaluation of currency is based on US$100,000 at 0.72USD:1SGD.

What if the reclassification of account has recorded before the exchange rate changed? Will there be any changes in the exchange gain/loss?

You record the funds transfer (reclassification of account) of US$30,000 from Term Deposit 1 account to the Term Deposit 2 account with the exchange rate of 0.72USD:1SGD. The journal behind the transfer is:

Debit the Term Deposit 2 account 30,000
Debit the Term Deposit 2 ~ Delta account 11,666.67

Credit the Term Deposit 1 account 30,000
Credit the Term Deposit 1 ~ Delta account 11,666.67

When the exchange rate has changed at the period end, MoneyWorks revalue the currency, the exchange journal:

Debit the Exchange Gain/Loss account 1,902.59

Credit the Term Deposit 1 account 1,331.81
Credit the Term Deposit 2 account 570.78

Working:

Term Deposit 1:
Original Rate: US$70,000 / 0.72 = S$97,222.22
Adjusted Rate: US$70,000 / 0.73 = S$95,890.41
Exchange Loss: S$(97,222.22 – 95,890.41) = S$1,331.81

Term Deposit 2:
Original Rate: US$30,000 / 0.72 = S$41,666.67
Adjusted Rate: US$30,000 / 0.73 = S$41,095.89
Exchange Loss: S$(41,666.67 – 41,095.89) = S$570.78

Total Exchange Loss: S$(1,331.81 + 570.78) = S$1,902.59

From the above examples, both reclassifications of account method derive the similar result. That is, have a similar exchange loss S$1,902.59.

MoneyWorks exchange journal

The Balance Sheet printed from both method have a similar debit balance of S$95,890.41 in the Term Deposit 1 account and S$41,095.89 in the Term Deposit 2 account.

Working:

Method 1:
Term Deposit 1:
Debit US$100,000 / 0.73 = S$136,986.30
Credit US$30,000 / 0.73 = S$41,095.89
Debit Balance: S$95,890.41

Term Deposit 2:
Debit: US$30,000 / 0.73 = S$41,095.89

Method 2:
Term Deposit 1: US$70,000 / 0.73 = S$95,890.41
Term Deposit 2: US$30,000 / 0.73 = S$41,095.89

Whether you did the reclassify of an account before or after the currency revaluation, MoneyWorks takes care of it.

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