Multiple Currency Sales / QuickBooks

Discussion in 'Small Business Helper' started by Nemo, Aug 31, 2005.

  1. Nemo

    Nemo Guest

    +0 / 0 / -0
    Hi and congratulations for providing free invaluable advice.

    I have a Limited company registered in UK and I am now entering my invoices in quickbooks to prepare my accounts. The problem is that I have invoices in GBP, USD, and CYP.

    From an accounting point of view, how do I have to record these transactions? I know that I have to convert them to GBP. From what I was told I have to use the currency rate for the date that th invoice was issued and then the currency rate for the date that I have received the money, and finally create a transaction account to record any profits or losses from currency transactions. Could you please provide me a detailed description on how to acheve this (i.e. debit this account, credit that) or an alternative solution? My quickbooks version does not support multiple currencies.

    And a second question: how do I enter down-payments that I have received in the past and are part of a contract in quyickbooks?

    I would be grateful for an answer,

  2. tsbhelper

    tsbhelper Small Business Helper Forum Moderator

    +5 / 0 / -0
    Hi Nemo,

    I am very familiar with accounting standards as outlined in the AICPA guidelines. However, these standards are for the U.S. only. AICPA stands for (American) Institute for Public Accountancy.

    You are in the U.K. While I believe that accounting is done in much the same way there, the rules regarding the timing for currency conversion are likely to be different.

    In the U.S. you would have to keep track of any gains or losses you incurred in the conversion between currencies. What you have been advised to do sounds to be exactly the same... but there may be some small differences.

    Having said that, I will give you an answer based on AICPA standards, valid for here in the U.S. I can't give you any real assurance that it is also the right way to do it in the U.K.

    The standard version of QuickBooks does not handle multiple currencies or currency conversion. What this means to you is that you will have to do the conversion manually. You are dealing with three types of currency, GBP, USD, and CYP. You will have to set up three different companies in QuickBooks, one for each type of currency. You will then be making transfers from the USD and CYP companies to the GPB company whenever there is a currency conversion issue.

    When you invoice a customer in either USD or CYP currencies, you use the appropriate company to generate the invoice. You will also need to convert that currency to the GPB equivalent as of the date of the invoice, and record it in the GPB books as well.

    When you receive payment from the customer on the invoice, you will also receive the payment with the same currency company that issued the invoice. Then, you will need to record the actual converted value as the payment in the GPB books as well. Record all the invoices and payments from the USD and CYP customers to two customer accounts in the GPB books, one for all USD customers, and one for all GYP customers. The net balance in each of these accounts will then be reflective of any profit or loss from currency conversions. The USD and CYP books will not be your real books, only subsidiary ledgers for sales/receivables/payments prior to conversion.

    This is the easiest way I know of to handle this with Quickbooks. Probably there are other ways, but none that I can think of that are any easier.

    Your second question... down payments in the past... assuming the past means before you set up your accounting on QuickBooks. If you are still in the same fiscal year as when you received those payments you will need to enter them as of the actual date they occurred. If they occurred in a fiscal (accounting) year prior to your setup on Quickbooks, then they should already be part of the bank balance you started with when you set up QuickBooks. You would only need to generate an invoice for the remaining amount to be paid so as to properly reflect the remaining amount to be paid as a receivable.
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