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Example Multi-Currency Transactions

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Overview

Once you have enabled multi-currency in your organization, follow the steps below to create Billings, Cash Receipts, Payables, Cash Disbursements, and Journal Entries in currencies other than your native currency. This article will walk through the following examples explaining the difference in the process when a foreign currency is used:

  • Post a Journal Entry in multi-currency and observing the currency conversion process
  • Create and Post a foreign Billing followed by creating and applying a foreign cash receipt
  • Create and Post a foreign Purchase Order followed by creating a foreign Payable
  • Create and Post a foreign Payable followed by creating a foreign Cash Disbursement

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Create Journal Entries in a Foreign Currency 

When creating a Journal Entry in multi-currency, the conversion rate will be automatically populated on the Journal Entry.  The conversion rate populates the rate from the Dated Exchange Rate Table in Salesforce. The Foreign Amount, Currency Conversion Rate, Ledger Amount, and Ledger conversion will appear on the transactions linked to the Journal Entry Lines.

Example: Your ledger currency is in USD and you will accrue a 100 Euro foreign fee and the currency conversion rate is 0.89.

  1. Navigate to the Journal Entry tab and click New.
  2. Enter a name for the Journal Entry, the currency (in this case, Euro), the ledger (in this case US Dollars), and add Journal Entry Lines as you normally would.
    Note:  The conversion rate to convert to USD from EUR (Ledger Currency:Foreign Currency) from the Dated Exchange Rate Table will automatically appear on the Journal Entry.

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  3. Click Save & Post.

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  4. On the Post, you will see that the currency on the Actual Ledger is USD, the Foreign Amount and Currency are Euros, and the Currency Conversion Rate has been recorded (in this case 0.89).

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Create a Billing in a Foreign Currency 

Let’s walk through the process of creating a Billing and applying a Cash Receipt in a foreign currency. The flow of processing Billings is very similar to that used in a single currency environment.

Example: Your ledger currency is USD and you will create a Billing for 100 Euros.

  1. Click the Billing tab and click New.
  2. Select a currency (in this case, Euro).
    Note:  The Currency Conversion Rate to convert to USD from EUR (Ledger Currency:Foreign Currency) from the Dated Exchange Rate Table will automatically appear on the Billing Header.
  3. The ledger will default to what is set up in the Default Ledger screen. If multi-company is enabled, then you can select a ledger other than the default.
  4. Select a Customer, and click Save.
  5. Add the Billing Line(s) and Save.

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    • On the Billing Header and subordinate Billing Line(s), you'll see that the foreign amount transaction is EUR 100.00, the Currency Conversion rate of 0.89 automatically inherited from the Billing in step 2, and the ledger amount in USD is 112.36.
    • This conversion rate is pulled from the Dated Exchange Rates table, the set up is described in the Add Currencies and Exchange Rates article.
  6. You will notice that there are two new fields on the right-hand side for Currency Conversion Rate and Ledger Amount on the Billing Header. The ledger amount is the converted amount from the foreign currency to the corporate/base currency, in this case, US Dollars, and this will be the amount posted to the GL.
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    Note:  If you do not see these fields, you may have to add them to the Page Layout (described in the Enable Multi-Currency setup article).
  7. If you are manually updating the Dated Exchange Rate Table, it is a best practice to update these tables before creating a Billing. This way, the current exchange rate will be used. Also, a conversion rate can be entered directly into the Billing and will override the exchange rate table.
  8. Once the Billing is posted, we need to receive a payment towards it. Follow the usual steps for a Cash Receipt, but make sure the currency is the same as Billing.

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Receive Payment and Apply Cash Receipt in a Foreign Currency

The process of Receiving Payment and applying a Cash Receipt in a foreign currency is very similar to that used in a single currency environment.

It is best practice to update the Dated Exchange Rate Table before receiving payment so the current exchange rates are being used. 

Example: Continuing the example started above in ‘Create a Billing in a Foreign Currency.’ There are two (2) methods that payments can be received and applied: 

A.  Receive Payment directly on the Billing record (1-step process) or
B.  Create a new Cash Receipt Record and then apply the receipt to a Billing (2-step process).

A.  Receive Payment directly on the Billing record

  1. Navigate to the Billing record that you want to receive payment on. Click Receive Payment which is found on the button menu on the Billing record.

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  2. Select a Receipt Type from the drop down menu. The detail panel will be automatically open once the Receipt Type is selected.  
    Note:  If you are utilizing Stripe, then you should select ‘Electronic’.  If not, then you should use ‘Check’.

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  3. The detailed required to receive the payment is entered here. The Currency carries over from the Billing record, as do the Billing Total and the Balance (both also in Euros). The required fields are:
      1. Amount - the amount that is going to be received and applied to this Billing 
      2. Receive Date 
      3. Payment Reference 
      4. Bank Account 

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  1. When all information has entered click the Receive Payment button.
  2. When you are returned to the Billing record, several things should be noted.

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      1. The Balance has been reduced by the Received Amount which is shown on the Billing detail page.
      2. Both the Cash Receipt record and the Billing Cash Receipt record are shown in the Applied Cash Receipts related record section. 
      3. By using the Receive Payment button on the Billing record, both the Cash Receipt AND the Apply Cash processes are performed in one (1) step.
      4. Setup Note: If you do not see all of these fields, you may have to add them to the Page Layout (described in  the Enable Multi-Currency setup article).

  3. By clicking on the Cash Receipt name, you can see the GL Transactions recorded. At this point the Currency Conversion Rate for the cash transaction is set and used to convert the foreign currency to the corporate/base currency, in this case, US Dollars, and this is the amount posted to the GL.  
    Note:  The Currency Conversion Rate to convert to USD from EUR (Ledger Currency: Foreign Currency) is from the Dated Exchange Rate Table.

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  4. By clicking on the Billing Cash Receipt name, you can see the GL Transactions applied. These are the transactions that clear the Unapplied A/R suspense GL account and reduce the Accounts Receivable GL account. This settlement also addresses any realized gain or loss on the currency exchange due to the timing of when the cash was received and when the revenue and accounts receivable were recorded. 

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  5. When a foreign denominated Cash Receipt is applied to a related foreign denominated Billing, the realized gain or loss on currency exchange will be calculated upon cash settlement and recorded to the default Currency Gain/Loss GL Account that is set up in Default GL Accounts.  This calculation captures the movement in currency exchange rates from billing to receiving payment. For further information see Understanding Realized Gain/Loss on Currency Exchange section below.

    B.  Create a new Cash Receipt Record and then apply the receipt to a Billing

  1. The above process can be accomplished by first manually creating a Cash Receipt, and then applying that Cash Receipt to one (1) or more Billings. This method is suggested when a single Cash Receipt is going to be applied to multiple Billings.
  2. When applying the Cash Receipt to a Billing, the currencies must match.
  3. Only Billings that are in the same currency that is recorded on the Cash Receipt will be shown in the Cash Receipt Apply page. In this example, only open invoices in Euro will be available for cash application.

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  4. As noted above, when a foreign denominated Cash Receipt is applied to a related foreign denominated Billing, a realized gain or loss on currency exchange will be calculated upon cash settlement and recorded to the default Currency Gain/Loss GL Account that is set up in Default GL Accounts.  This calculation captures the movement in currency exchange rates from invoicing to receipt of payment. For further information see Understanding Realized Gain/Loss on Currency Exchange below. 
  5. See Receive and Apply Cash article in the Knowledge Base for additional details.

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Create a Purchase Order in a Foreign Currency

Let’s walk through the process of creating a Purchase Order in a foreign currency. The flow of processing a Purchase Order is very similar to that used in a single currency environment.

If you are manually updating the Dated Exchange Rate Table, it is a best practice to update these tables before creating a Payable. This way, the current exchange rate will be used. Also, a conversion rate can be entered directly into the Payable and will override the exchange rate table.

In this example the ledger currency is USD and Purchase Order will be created in Euros.

  • Click the Purchase Order tab and click New.
  • Select the appropriate currency (in this case, Euro). 
    • The Currency selected should be the currency that the Vendor will invoice in and be paid in. In this example, the Vendor will invoice and expects to be paid in Euros.
      Note: The Currency Conversion Rate to convert to USD from EUR (Ledger Currency:Foreign Currency) from the Dated Exchange Rate Table will be blank until it is set in the Receive process. The currency conversion rate that will be used for the Inventory and GL transactions will be set based on the rate on the Initial Inventory Receive Date recorded for the Purchase Order.
    • The conversion rate is pulled from the Dated Exchange Rate table, the set up is described in the Add Currencies and Exchange Rates article.
  • The ledger will default to what is set up in the Default Ledger screen.
  • If multi-company is enabled, you can select a ledger other than the default.
  • Select a Vendor, and click Save.

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  • Add the Purchase Order Line(s) and Save.

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    Note: Purchase Order Header and subordinate Purchase Order Line(s), you’ll see that the foreign amount transaction is in Euro.

  • The process of receiving the Purchased Product is virtually identical to that documented in the Receiving/Unreceiving a Purchase Order Article.
    Note:  For Multi-Currency Purchase Orders,  at least one (1) Purchase Order Inventory Movement (“PIM”) must have been recorded prior to the creation of the Payable for that Purchase Order. The currency conversion rate used for the Inventory and GL transactions is set based on the Initial Inventory Receive Date in the first PIM recorded for the Purchase Order. Creating a Payable prior to that first PIM, will generate an error.

    • Click on the Receive button on the button menu.

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    • Fill in the Warehouse, Location, and Quantity that is being received. The Receive date default to the current date, but can be overridden. Save when the information is complete.

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    • As this is the PIM for this Purchase Order, the Initial Receive Date and the Currency Conversion Rate are set and are reflected on the Purchase Order.

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    • All subsequent inventory receipts will use this Currency Conversion Rate and Initial Receive Date that was set by the first PIM.
    • Below shows the initial receipt of the first five (5) units for each of the purchased Products.

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    • The related PIM shows the unit cost in USD. The Currency Conversion Rate of 0.89 is now set and will be used by all subsequent Purchase Order Inventory Movements on this Purchase Order until it is fully received. 

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    • The PIM will also trigger the weighted-average cost calculation. The new weighted-average cost is posted to the Inventory Cost object.  (See Inventory Valuation - Weighted-Average Cost  in the Knowledge Base for more details.) Here only the five (5) of the ten (10) ordered that were received are included in the weighted-average cost calculation.

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    • The next Inventory Receipt, below, will use the same initial currency conversion rate that was set above on the PIM. 
      Note: The USD unit costs are the same.

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    • The PIM then triggers the weighted-average cost calculation. Here the last five (5) of the ten (10) ordered are received. Note that the weighted-average cost changed from the previous record.

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Create a Payable in a Foreign Currency

The process of creating a Payable and applying a Cash Disbursement in a foreign currency is very similar to that used in a single currency environment. 

Important notes on Payables and Receiving Inventoried Products when Multi-Currency is enabled. 

  • When Multi-currency is enabled, the conversion rate for inventoried Products is set on the Initial Receive Date on the related foreign denominated Purchase Order record. The currency rate MUST  be set PRIOR to creating the related foreign denominated Payable. Therefore, if the foreign denominated Purchase Order includes Inventoried Products, the foreign denominated Purchase Order MUST be received prior to creating a foreign denominated Payable for the inventoried products.
  • It is considered Accounting Seed best practices to only create a Payable for inventoried products that have a related, fully received Purchase Order.  Payables and Purchase Orders for inventoried products have related transactions through a Vouchers Payable suspense GL account. (see Payables for Inventory Map ).
  • Again, if you are manually updating the Dated Exchange Rate Table , it is best practice to update the Dated Exchange Rate Table before issuing payment so the current exchange rates are being used. Also, a conversion rate can be entered directly into the Cash Disbursement, which will override the exchange rate tables.
  • If the foreign denominated Purchase Order was previously received and then is completely unreceived (see Receiving/Unreceiving a Purchase Order), and all associated PIMs deleted, then the Initial Receive Date will be deleted. If the foreign denominated Payable had already been created prior to the Purchase Order being unreceived, special care must be taken to avoid creating an out of balance condition caused by re-receiving the Purchase Order at a different conversion rate (due to a different Initial Receive Date rate) than what is on the original Payable.

A.  PAYABLES FOR INVENTORIED PRODUCTS

Continuing the example started above in ‘Create a Purchase Order in a Foreign Currency.’ This example is for Inventoried Products ordered on a Purchase Order.

  1. Verify that the Purchase Order has been received, ensuring that the Initial Receive Date and currency rate have been set.
  2. From the Purchase Order record, click Create Payable found on the button menu.

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  3. Verify, and update if needed, the Issue Date, the Due Date, and the Purchase Order Status. Next enter either the Quantity to Pay or the Amount to Pay. When complete, click on the Create Payable button.

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  4. The Edit Payable will now be displayed. The Currency and Currency Conversion Rate are filled in based on the Purchase Order and the Initial Receive Date that was set on the Initial PIM. The amounts, dates, and vendor detail are populated from the Create Payable input. The ledger will default to what is set up in the Default Ledger screen.
  5. If multi-company is enabled, then you can select a ledger other than the default. If everything is correct, click the Save button.
    • As noted, for inventoried Products , the conversion rate is automatically inherited from the / Initial Receive Date on the related Purchase Order record.
    • Accounting Seed best practices recommend that you do not change this inherited rate from the Purchase Order.  If you do so, you may possibly throw your Vouchers Payable suspense account out of balance.

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  6. You will notice that there are two new fields for Currency Conversion Rate and Ledger Amount on the Payable Header. The ledger amount is the converted amount from the foreign currency to the corporate/base currency, in this case, US Dollars, and this will be the amount posted to the GL.

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When the Payable is ready, it should be Posted. Posting will generate the GL transactions.

  1. To Post click the Post button found on the button menu.
  2. On the Post verification panel, the Ledger Amount in USD, Foreign Amount and Currency Type, and the Currency Conversion Rate used are all shown. If correct, Click the Post button to Post.
         Note:  The debit is to Vouchers Payable for an Inventoried Product.

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B.  PAYABLES FOR NON-INVENTORIED PRODUCTS

For non-Inventory Products, creating and posting the Foreign Currency Payable will set and use the Currency Conversion Rate based on the Payable Issue Date. For purchases not on a Purchase Order, the Payable is created from manually from the Payable object.

  1. Go to Accounting Home>Payables and click New.

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  2. A New Payable will be opened.

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  3. Select a currency (this will be paid in Euros,).
  4. While a Currency Conversion Rate can be input, it is best practice to leave it blank. Doing so will auto-populate the Currency Conversion Rate from the Dated Exchange Rate Table (whose set up is described in the Add Currencies and Exchange Rates article), based on the Payable’s Issue Date. The Currency Conversion Rate will be displayed on the Payable Header after it is created.
  5. The ledger will default to what is set up in the Default Ledger screen. If multi-company is enabled, then you can select a ledger other than the default.
  6. For the Payee information, enter either a Vendor, a Contact, or an Employee (only one (1) can be entered.)
  7. Verify all other fields and when complete, click Save.
  8. Add a Payable line(s), in Euros (for this example), and click Save or Save and Post.

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  9. You will notice that there are two new fields for Currency Conversion Rate and Ledger Amount on the Payable Header. The ledger amount is the converted amount from the foreign currency to the corporate/base currency, in this case, US Dollars, and this will be the amount posted to the GL.

    EMC32.png

    Note: If you do not see these fields, you may have to add them to the Page Layout (described in the Enable Multi-Currency setup article).

    When the Payable is ready, it should be Posted. Posting will generate the GL transactions.

  10. To Post click the Post button found on the button menu.
  11. On the Post verification panel, the Ledger Amount in USD, Foreign Amount and Currency Type, and the Currency Conversion Rate used are all shown. If correct, Click the Post button to Post.
    Note: The debit is to the Expense GL account set on the Payable Line for a Non-Inventoried Product.

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Create a Cash Disbursement in a Foreign Currency

Once the Payable is posted, we need to pay a Cash Disbursement against it. The process of creating a Cash Disbursement in a foreign currency is very similar to that used in a single currency environment.

Again, if you are manually updating the Dated Exchange Rate Table , it is best practice to update the Dated Exchange Rate Table before issuing payment so the current exchange rates are being used. Also, a conversion rate can be entered directly into the Cash Disbursement, which will override the exchange rate tables

Continuing the example started above in ‘Create a Payable in a Foreign Currency.’

  1. Click the Payable tab and click the Pay button. You'll see the Currency Conversion Rate has defaulted to the correct rate for today. This may be different from the rate used for the Payable.
    • When applying the Cash Disbursement to a Payable, the currencies must match.
    • Only Payables with the same currency that is recorded on the Cash Disbursement will be shown. So in this case, only open invoices in Euro will be available for cash application.
      Note: When a foreign denominated Cash Disbursement is applied to a related foreign denominated Payable, the realized gain or loss on currency exchange will be calculated upon cash settlement and recorded to the default Currency Gain/Loss GL Account that is set up in Default GL Accounts.  This calculation captures the movement in currency exchange rates from invoicing to issuing of payment. For further information see Understanding Realized Gain/Loss on Currency Exchange below.
    • It is best practice to add the Currency field to the Payable list view. This will provide easy sorting to pay all open A/P items of the same currency.

  2. Click Pay & Post.
    • As payment is being made, the conversion rate can be entered here in the Currency Conversion Rate field, which will override the rate in the exchange rates table.
    • Once the batch is posted, any realized gain or loss will also post to the default Currency Gain/Loss GL account (as defined in Default GL Accounts).

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Understanding Realized Gain/Loss on Currency Exchange

A realized gain or loss on currency exchange happens when the following occurs:

  • The currency exchange rate on the day the customer was billed is different from the day cash was collected from the customer.
  • The currency exchange rate on the day the vendor invoice was recorded (or the initial Inventory Receive Date was recorded) is different from the day cash was paid to the vendor.

Accounting Seed will automatically calculate and record realized gains or losses for you. These will be posted to the default Currency Gain/Loss GL Account that is set up in Default GL Accounts.

In the above example, the Currency Conversion Rate was 0.89 when the Initial Inventory Receive Date  was recorded. At the time of the Cash Disbursement, the Currency Conversion Rate was 0.75. This gives us a conversion difference of $2,495.88, which is automatically posted to the Currency Gain/Loss GL Account.

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