Issue:

Explanation of Multi Currency in Exact Financials C/S

Solution:

If you do business with companies in other countries, you often send and receive invoices in foreign currencies. Your foreign suppliers also have to be paid in their currencies. You may also have to deal with foreign currencies if you have foreign subsidiaries. This means that you need foreign currency bank accounts.

Transactions and entries in foreign currencies can, of course, be entered in your accounting system in your own (default) currency. This, however, does not give a clear picture of the composition of your assets and liabilities because you still have to pay in foreign currency. Transactions and entries have to be revalued from time to time due to fluctuations in exchange rates.

Default currency

The definition of the default currency for the current company is particularly important. All amounts are presented in the default currency unless you indicate otherwise. You enter the default currency in the company settings

Currency journals

It is necessary to create separate cash, bank and giro journals for each currency code. The process of creating currency journals is similar to that of creating ordinary journals. The only difference is that specific currency information is added to the currency journals.

Amounts are always converted into the default currency when entries are posted. If the amount paid for an outstanding item differs from the original amount because of exchange rate differences, the difference is entered in an 'Exchange rate differences' account.

• If the currency code used is the same as the default currency code, the exchange rate can't be changed.

Invoices in foreign currency

In addition to invoicing companies for goods and services in your domestic currency, it is also possible to invoice foreign companies in their own currency. Invoice data can be recorded in foreign currency in several packages. To be able to do this, you need to create the relevant currencies and corresponding exchange rates in your company.

Payments in foreign currency

You can enter payments in the currency of your choice to write off outstanding items. The following table shows possible situations (the currency codes are used as examples):

These examples affect the way payments are posted in different ways, because the exchange rate differences are posted in relation to the outstanding item written off. The fifth situation is explained in the example below.

• This situation, known as the multi-currency situation, occurs only if you enter a payment in a currency journal.

Example

Suppose your default currency is Belgian Francs (BF), you have entered an invoice in United States dollars (USD) and you received the payment in Deutsch Marks (DM). You can change the exchange rate used for the outstanding item related to the default currency. After changing or accepting this rate, you enter the amount received in DM (the currency of the journal in which you're entering the payment). Next, the amount received from your customer in DM is shown in USD. This amount may differ from the amount on the invoice because of discounts, credit surcharges, payment differences or a combination of these. You can write off this difference but you can also decide to maintain the remainder of the outstanding item.

Overviews and analyses

You can generate a currency position overview. This overview shows the amounts of the transactions posted in foreign currencies. It includes the balances of debtor and creditor accounts. It also shows the possessions (such as bank accounts in foreign currencies) and debts. The assets and liabilities columns show transactions in foreign currencies for other balance sheet accounts if you indicated this in your settings for the general ledger accounts in which transactions are entered.

It is also possible to perform an aging analysis that produces an overview of the total amounts of outstanding items per currency, giving you a picture of your currency risk. The week when payment is due is specified for each amount.