Exchange gain/loss account

  • 1
  • Question
  • Updated 2 years ago
  • Answered
Everytime we pay a ForEx bill the discrepancy in the PAID amount vs the Calculated amount appears.  No problem for me when this is a few cents - usually if it is a rounding error it is less than $0.50.  However there are a number of our transactions where the discrepancy is large - like hundreds or thousands of dollars.
I can't work out why this is and I would like to be able to fix it...

Help!
Lucas
Photo of Lucas Anstiss

Lucas Anstiss

  • 632 Points 500 badge 2x thumb

Posted 5 years ago

  • 1
Photo of Lucas Anstiss

Lucas Anstiss

  • 632 Points 500 badge 2x thumb
Hello?  Reckon??  Anyone care about my issue???
Photo of Jason Jiao

Jason Jiao, Alum

  • 1,156 Points 1k badge 2x thumb
Hi Lucas,

Welcome to Reckon Community.

This is a normal behavior of Reckon accounts. The reason is the Exchange rates of the payment is different compared to the original rate of bill reflecting in the Exchange Gain/loss account

From time to time you may need to make a home currency adjustment through General Journal

The following information is from Reckon Accounts Help file by searching 'home currency'

To make your net worth reports show the true value of your foreign-currency accounts (and therefore your company) at the end of a reporting period, an accountant should make a home-currency entry in the general journal to account for unrealised gains or losses.
  1. From the Company menu, choose Make General Journal Entries.

  2. In the detail area, enter distribution lines.

    Enter the home-currency amounts in the appropriate debit and credit columns as taken from the Unrealised Gains and Losses report. Choose the Exchange Gain/Loss expense account as the other account that will be affected by this entry.

    When making a journal transaction for an A/P or A/R account, you need to specify a customer name. For the purpose of this activity, create a phoney customer name to whom you can assign unrealised gains and losses.

  3. Tick the Home Currency Adjustment check box.

    This ensures that the amounts you enter are recorded as an adjustment to the home currency without affecting the foreign balance of that account.

  4. Save the journal transaction.

Hope the information helps.

Cheers
Jason
Photo of Tina Williamson

Tina Williamson

  • 222 Points 100 badge 2x thumb
Hi Jason,

I have also been experiencing similar issues to above with Unrealised Foreign Exchange Gain/Losses.

I have followed your instructions above, but as this effects the Creditors Ledger, how do you then fix the ledger without altering the affect on the Accounts Payable account?

Cheers 

Tina
Photo of Jason Jiao

Jason Jiao, Alum

  • 1,156 Points 1k badge 2x thumb

Hi Tina,

Yes. it does effect the creditor ledger in foreign balance, but its AUD value is listed as $0 (home currency). The accounts payable account on the balance sheet now shows the correct balance in AUD.

Thanks

Jason

Photo of Lucas Anstiss

Lucas Anstiss

  • 632 Points 500 badge 2x thumb
Thanks Jason.
My problem is that for some transactions the amounts are miniscule (what I would say are the true gains / losses - a rounding error).  For others where the amounts are hundreds or thousands of dollars these numbers are a fiction.  
Can you explain how Reckon calculates the 'original value'?  Is it related to the purchase order?  Can it be changed at a later date?  I would like to be able to ensure that the original amounts are as accurate as possible.
Please explain...

thanks
Lucas
Photo of Jason Jiao

Jason Jiao, Alum

  • 1,156 Points 1k badge 2x thumb
Hi Lucas,
Purchase orders are non-posting transactions, which do not reflect on your accounts. The oriinal value is calculated base on the exchange rate of the bill. The Exchange and Loss account is affected when the bill is paid with a different exchange rate. If you want to change rate of the bill at a later date, you need re-apply the payment reflect the new change in Exchange and Loss account. Does it help to resolve the issue?

Thanks
Jason
Photo of Lucas Anstiss

Lucas Anstiss

  • 632 Points 500 badge 2x thumb
Hi Jason,

yes this solves my issue.  Thanks for your help.
Regards,
Lucas
Photo of Jason Jiao

Jason Jiao, Alum

  • 1,156 Points 1k badge 2x thumb
Glad to hear that helped :-)
Photo of Margaret Manchee

Margaret Manchee

  • 2,222 Points 2k badge 2x thumb
Hi Lucas,

We have similar problems. And it is really wierd that Reckon generates Exchange gain/loss randomly. I have reconciled as much as I could but there are still so wierd balances sitting in some of my accounts. 

We can have a chat offline if you would like?

Cheers, M
Photo of Lucas Anstiss

Lucas Anstiss

  • 632 Points 500 badge 2x thumb
Thanks Margaret - I have taken Jason's advice up above and managed to get rid of the large discrepancies.  
Cheers
Lucas
Photo of Kristian Kostov

Kristian Kostov

  • 60 Points
Hi All

A related question to the above is why the current balance of the unrealised gains and losses report for FY2015 is different to the debtors balance as at 30 Jun 2015 prior to the adjustment?

Cheers

Kristian
Photo of Geraldine Cosgrove

Geraldine Cosgrove

  • 80 Points 75 badge 2x thumb
A few notes that may help others, and are in addition to Jason's "reapply payment" advice above.

For AP accounts in foreign currency (EUR in these examples), Reckon associates with each transaction an EUR amount, an Exchange Rate  and an AUD amount. When you look at the Balance Details in the Supplier Centre, it shows the outstanding invoices in EUR, each with the equivalent AUD amount – but it only shows bills with a non-zero EUR balance.  

 

However, when you do a Supplier Balance report, it reports the running  balance of all AUD entries. If the AUD entries were correct for all transactions, this would be the same thing, but there are two circumstances where the AUD balance is known to get out of alignment with what it should be ( I have tested both of these):

 

-          When you pay a bill, the AUD amount that posts to the AP account has nothing to do with the exchange-rate you enter on the bill-payment screen – it is calculated from the average exchange rate of the bills you are paying, that was entered at the time the bill was created.  Obviously, the point is for the bill payment to directly negate the AUD amounts associated with the original bills. BUT it only calculates the AUD equivalent at the time you save the bill payment. If you ever edit the exchange rate on any of the bills that you paid, you will put the AUD balance of the AP account out of whack, because the billed-AUD and the paid-AUD are no longer the same. The only current solution is to open the matching bill-payment and force Reckon to re-save (eg by editing the Memo field), which forces a re-calculation.

 

A more fundamental problem is the second one -

-          When you enter a credit from a supplier in EUR, you have the opportunity to enter an exchange rate (we normally just enter the exchange rate on the day of entry).  This posts an AUD amount to the AP account based on the exchange rate you entered. When you apply this credit to supplier bills it DOES NOT do what it does for other types of payment – i.e. look up the AUD equivalent that was posted by the bills you are paying, and adjust the credit-note exchange rate to match. It just leaves the exchange rate as whatever you entered. So the AP account is inevitably going to get an erroneous AUD balance. One solution is to go back to the Credit note, and change the exchange-rate to match the bill(s) that you applied it to. Obviously this may be at some later date. The other solution is to do a home-currency journal entry as suggested above, which is a one-off correction you can do at the end of the year to bring the running AUD value back in line without affecting the foreign-currency amount.

Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hi Geraldine,

Welcome to the Reckon Community and thank you for your clarifications.

regards,
John
Photo of Ken Fayers

Ken Fayers

  • 60 Points
I've got a problem with these home currency adjustments. My Creditors ledger and balance sheet are correct but my A/P Ageing Summary is wrong as it's including home currency adjustments for the foreign currency creditors. How do I exclude these from the A/P Ageing Summary so that it agrees with the balance sheet? Come to that why would the software think that I wanted an A/P Ageing Summary with a different total on it from the balance sheet?
(Edited)
Photo of Lorelle Taylor

Lorelle Taylor

  • 140 Points 100 badge 2x thumb

I have this problem at the moment after entering accountant's journals. Foreign currency creditors accounts all show 0.00, but I have balances now on AP Aging Summary, even though suppliers show 0.00 balance in Supplier Centre. Was there a fix for this?

(Edited)
Photo of Sonia Connon

Sonia Connon

  • 576 Points 500 badge 2x thumb
Any advice on how to remove the home currency adjustment journal 0.00 from USD accounts payable?
Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hello Sonia,

Thanks for asking.

You can simply delete the home currency adjustment journal.  

Full details about home currency adjustments is available here.


regards,
John
Photo of Lorelle Taylor

Lorelle Taylor

  • 140 Points 100 badge 2x thumb
This info doesn't tell me how to get rid of the balance left on the AP Summary after doing my accountant's journal.
Photo of John G

John G, Information Support Analyst

  • 27,530 Points 20k badge 2x thumb
Hello Lorelle,

Thanks for asking.

When you make a Home Currency Adjustment to Accounts Payable, you should be left with an appropriate balance.  Individual foreign Suppliers will be left with a balance that will be offset by the dummy supplier created to take the adjustment.  

Hope this helps.

regards,
John

This conversation is no longer open for comments or replies.