ANSWER ID:11145

This support note explains the relationship between currency exchange rates and certain reports. Exchange rates are stored against two types of records in your company file:

• The Currency Information record found in the Lists Menu, Currencies
  

and

• any transaction where you have used a foreign currency.

Different rates in these records often explain apparent discrepancies. Because of exchange rate fluctuations, you need to know which report uses which exchange rate record when you are reporting on foreign currency balances and transactions.

The information in this support note will enable you to easily reconcile the figures in those reports.

Note: For more information on using multiple currencies in your software, see our support note Setting up and troubleshooting multiple currencies.

Summary:

• The Balance Sheet uses exchange rate information stored in the individual Transactions to calculate amounts shown
  
• Account Receivable reports use the rate from the Currency Information window which you access through the Currency List.
  

How do I check these different exchange rates?

Currency Information Window Exchange Rate

To see the exchange rate that you have set against the Currency Information window or currency itself:

1. Go to the Lists menu and choose Currencies.
   
2. Click the white zoom arrow next to the currency you want to check.
   
   

Transaction Exchange Rate

To see the exchange rate that you have set against a particular transaction:

1. Open the transaction in question the way you normally do.
   

2. Click the Rate button.
   
   

In the following example, your company Clearwater Pty Ltd invoices its first ever European customer for professional services. You invoice Eurolandia � 1000.00 for your attendance at a conference as a guest speaker. At the time you issue the invoice, the exchange rate is 1.704739.

You go to the Lists menu, choose Currencies and drill into the EUR currency by clicking its zoom arrow. You enter the exchange rate 1.704739.

Having recorded the invoice for EUR � 1000.00, you open your account list and see that the European Customers Trade Debtors account shows a balance of � 1000.00. You add 1000 to the amount in the European Customers Exchange account and see that you have invoiced them for the equivalent of AUS$ 1704.74.

You run the Receivables Reconciliation Summary report for this customer. You have selected for the report to display in Local Currency in the Finishing tab and the balance agrees with your Account List balance.

Some days later, you review your Currency List and since you had the latest exchange rate to hand, you update the EUR currency exchange rate to 1.8.

You run the Receivables Reconciliation Summary Report again and see that it reflects the change in the exchange rate:

When you look at your balance sheet, you find that if you add the balance of the European Customer Trade Debtors account and its corresponding exchange account, the sum does not equal $1800.00; they still show a total outstanding of 1704.74 as shown in the image earlier in this support note.

That is because Accounts List balances are calculated transaction by transaction; different exchange rates used for these transactions are taken into account. The Receivables and Ageing Sales reports on the other hand use the exchange rate from the Currency list.

Are both balances correct? What does this mean?

The difference between these two amounts reflects what is known as an Unrealised Currency Gain/Loss. Depending upon exchange rate fluctuations and the timing of the customers payment, the sale may be in the end worth a greater or lesser amount than its value at the time of invoicing.

Our support note Recording Unrealised Gain/Loss has more information on this aspect of working with multicurrency.