An in-depth look at QuickBooks Multi-Currency functionality.

1. An in-depth look at QuickBooks Multi-Currency functionality. Session will emphasise how to understand Multi- Currency reporting and how to avoid the common pitfalls.

2. MultiCurrency Functionality • This presentation will Cover: • Brief Overview on the setting up of Multi Currency • Cover Topics specific to Making adjustments, the setting up, and the understanding of reports • Rules for Multicurrency • Balancing Sub Ledgers to Balance Sheet • Wish list • Q&A

3. MultiCurrency • During the presentation we will be using a sample file, “QuickBooks Multicurrency File” • The presentation will cover Functionality of Multicurrency rather than how to set up • For this presentation we will be working with examples of Foreign Currency Accounts Receivables in US$ • File & Notes will be available to download from Quicken Website

4. Brief Overview on setting up for MultiCurrency • Multicurrency is only available from QuickBooks Pro and up • Once turned on, Multicurrency cannot be turned off • This is my interpretation based on my experience in using Multicurrency

5. Multicurrency Set Up • Edit: Preferences> Accounting> Company Preferences Tab> Tick USE MULTICURRENCY. • Choose Home currency> New Zealand Dollar • Note: Once turned on Multicurrency cannot be turned off • The Tick box Use foreign prices on items gives you the ability to create a fixed foreign price for any items sold. The foreign price is used in foreign transactions that match the currency selected in the Use foreign prices on items preference. (You can only have one foreign item currency) • This allows for a foreign sales price to be recorded in the item info as well as NZ$. This preference can be turned on or off at any time.

6. Multicurrency Set Up • Once Multicurrency is turned on the Currency List is available under Lists > Currency List • This is where you update the default Exchange rate for your active currencies. • There are many currency converter websites and I tend to use http://www.oanda.com/currency/converter/ Make sure you convert the foreign currency into NZD • Once Multicurrency is turned on: • Each transaction will now have an additional field in order to enter exchange rate • For each Supplier &/or Customer using a different currency QuickBooks requires a matching Accounts Payable &/or Accounts Receivable account to be created first linked to the appropriate foreign currency. You cannot change the Currency set to the Customer/supplier once used. • Foreign Currency Bank accounts will also need to be created if the client uses one. • QuickBooks also adds an expense account called “Exchange Gain/Loss”, this is where QuickBooks posts any realised currency exchange gains or losses

7. Multicurrency Set Up Expense account created when multicurrency is turned on "Exchange Gain/Loss Register balance displayed in Foreign Currency Customer Centre amounts displayed in Foreign Currency Currency & Exchange Rate Box

8. When does Exchange Gain/Loss record on transactions • Transfer To/From AUD Bank to Foreign Bank DOES NOT create a Gain/Loss. This only revalues the foreign Bank Account for Balance Sheet. • This example I have transferred 10,000 USD from NZD Bank To USD Bank using the NZD currency in Transfer Currency Box and the revaluation of the US Bank Account is using the exchange rate 1.41068 • Creating Credit Notes or Applying credits In AR & AP DOES NOT create a Gain/Loss. It uses the Exchange rate for revaluation into AUD for Balance Sheet • Enter Bills & Invoices DOES NOT create Gain/loss. It uses the Exchange rate for revaluation into NZD for Balance Sheet

9. When does Exchange Gain/Loss record on transactions • Receive payments, Pay Bills create an exchange Gain/Loss. Even if you create a transaction in a foreign currency and pay or receive money into Foreign account. It is recording the difference between the exchange rate on original transaction as opposed to payment rate. If you do not want to record an exchange variance then use the same rate for both transactions. GST rounding on Foreign Transactions (0.01) will be booked to Exchange Gain/Loss account Exchange Loss $13.37 Invoice raised $US 1,650 incl GST @ 1.41068 NZ$916.94 Partial Payment received $US 650 @ 1.39010 NZ$903.57 Difference = Exchange Gain/loss Gain $13.37

10. Rules For Multicurrency • Do not change exchange rate on an Invoice or Bill that has payments applied. This will create a discrepancy (value of Change) in the NZD$ balance. As the exchange Gain/loss calculated with the payment remains unchanged the Gain/loss is now incorrect. To fix this requires a Home Currency adjustment or to force a revalue of the exchange gain/loss by opening payment, untick invoice paid and then retick. • Do not change the Exchange rate on a bill recording inventory item. This will change the AVERAGE cost for the affected item as it revalues the transaction. This will change balances on Balance Sheet (Inventory asset) and Profit & Loss (Cost Of Goods Sold) if the item has been sold. • Do not leave unapplied payments & Credit Notes. This causes discrepancies in the reports and to the calculation of the Exchange Gain/loss. If possible use the same exchange rate for Credit notes as the original transaction.

11. Rules For Multicurrency • Think about using Fixed Monthly Exchange rates per each month. This willmake it easier to keep track on the accuracy of rates used on each transaction • Calculate the exact Exchange rate when money is actually paid into or out of NZD BANK account. The Exchange rate to use in this scenario is the actual as per bank statement. To calculate to the correct decimal places in order to match the bank statement, use the windows calculator. Divide the Foreign amount into NZD eg NZD$$ / USD$$ = Exchange rate • Exchange Rate not changing to current Rate when converting Sales Orders into Invoices. When Purchase Orders are converted into Bills the Exchange rate updates to the default Rate, this is not the case with Sales Orders. When SO are converted into Invoices the rate remains the same as SO rate. You are required to remember to update the Rate.

12. Rules For Multicurrency • GST reporting incorrectly on Foreign Currency transactions with TAX CODES on Tax Reports. Tax Summary ,Tax detail & GST 101 reports display the total tax column $value incorrectly when a Tax code (S) is used in a Foreign Currency transaction and there is an Exchange rate change. It keeps the original NZD GST converted rate and only updates the net. Only affects Tax reports and not General ledger. Reports affected are all BAS Engine Reports. Eg. Tax Summary, Tax detail, BAS Engine. The Fix is to delete the tax code, tab and re enter Tax code for each line on transaction, RE SAVE. Only affects Foreign Currency transactions with Tax codes.

13. Balancing Sub ledgers to Balance Sheet AR & AP ledgers need to be balanced to the Balance Sheet periodically (at least at End of Year) In this scenario we are looking at Accounts receivable Scenario Balance on 02/06 is US$1,000 NZ$1,410.68

14. Balancing Sub ledgers to Balance Sheet Reports to set up to check balances: 1. Customer Balance Detail Report: REPORT TO CONFIRM BALANCE OUTSTANDING in Foreign Currency AT A PRTICULAR DATE back in time **MUST enter correct From & To Dates taking into account date of oldest transaction outstanding • Customer Balance Detail Report: •  Modify: Display • Un tick Amount & Balance • Tick: Open Balance, Actual Rate, Currency, Foreign Balance • Advanced Tab: Open Balance/Ageing Reports at REPORT DATE • Modify: Filters • Account: Multiple accounts: Choose the AR-Foreign account • Modify: Header/Footer: Rename Header by adding Currency

15. Balancing Sub ledgers to Balance Sheet 2. Customer Balance Summary • Modify: Filters • Account: Multiple accounts: Choose the AR-Foreign account • Modify: Header/Footer: Rename Header by adding Currency 3. A/R Ageing Summary • Modify: Filters • Account: Multiple accounts: Choose the AR-Foreign account • Modify: Header/Footer: Rename Header by adding Currency

16. Balancing Sub ledgers to Balance Sheet 4. Customer Open Invoices  **Designed to display outstanding customer balance in NZD$ & not able to accurately display customer outstanding in foreign Currency as it does not take into account adjustment notes & Partial Payments. • Modify: Filters • Account: Multiple accounts: Choose the AR-Foreign account • Modify: Header/Footer: Rename Header by adding Currency • Advanced Tab: Open Balance/Ageing Reports at REPORT DATE • Modify: Display • Un tick Terms, Due Date, Ageing • Tick: Realised Amount, Actual Rate, Foreign Amount, Currency

17. Balancing Sub ledgers to Balance Sheet NZD$0.00 -NZ$7.88 due to 7.88 Home currency adjustment

18. Balancing Sub ledgers to Balance Sheet Balance of AR US$ in Balance Sheet will equal balance in Customer Summary Report. They show a balance of $7.88 NZD owing due to the discrepancy of the Exchange rate used on the Credit note as opposed to the invoice.

19. Balancing Sub ledgers to Balance Sheet The Balance on Open Invoices, Balance Detail reports & Ageing Reports show Zero NZD as outstanding. This creates issues with Auditing as they compare Balance Sheet AR to AR Ageing report. Accountants need to compare Balance Sheet AR to Customer Balance Summary as these two reports should balance. To balance this discrepancy a HOME CURRENCY ADJUSTMENT is required • Make general journal Entries • Tick Home Currency adjustment box • Create Journal to balance discrepancy to the customer and offset to Exchange Gain/Loss Account. To Revalue Foreign Accounts for end of period adjustments:  Decide on the period that is required for revaluation purposes • Create Unrealised Gain & Loss report (Reports> Multicurrency) • Choose the Exchange rate for revaluation The report will revalue the Foreign accounts with the adjustments required Enter the adjustment as a HOME CURRENCY ADJUSTMENT AR & AP accounts will require a name to book the adjustment to. I use US$ AR Revalue for AR. US$ AP Revalue for AP. I reverse the revaluation at the beginning of the next period Book the revaluation to an account Unrealised Gain/Loss Account

20. Wish List • Need the ability to choose Use foreign prices on items for purchasing as well as invoicing. Eg being able to produce a Purchase order choosing Foreign Currency and not NZD • Need Sales Orders to update exchange rate the same as Purchase Orders • Update the currency list over the internet

21. An in-depth look at QuickBooks Multi-Currency functionality. Questions Presented by : Julie Gordon