Foreign Exchange

Question

Or accountant would like us to set up Foreign Exchange in our books. We have already closed 2019 and Posted for Jan 2020. 
 98% of our inventory is US$ 
 We sell to both CDN and US customers 
 In the past I prepare a year end JE to convert the US$ Sales, Bank, AR, AP to CDN. Which I guess could be done within Sage if FX set up. 
 One problem is we sometimes Pay our US$ customer out of our CDN bank account via Western Union, as we don't always have enough US$ in the US$ bank account. At that time I take the diff between US and CDN and book the FX to our COGS directly. So if I set up FX to use in Sage I am not sure how I would account for the Payables that are sometimes paid from out CDN bank account. 
 Thanks

RandyW · Accepted Answer

Bobcaygeon said: as mentioned our accountant would like us to set FX up in Sage instead of doing manual entries to revalue accounts at end of year. 
 Yes, I read your post. It's going to take some work and some learning, and for foreign currency entries it might be easiest to reverse the entry, and enter them properly. 
 I.e. It is not possible to just change the currency for an existing vendor account, or to have multiple currencies for A/R or A/P, so you will have to create a new account for that vendor, and enter all new invoices to the new vendor. 
 Whether it would be easier to start your financial year over, or to gradually convert everything as you need to make new entries, is between you and your accountant. 
 I don't know anything about your business, but probably I would do the conversion and setup one account at a time, probably starting with the bank accounts, then any foreign currency receivables, then any payables. 
 
 Bobcaygeon said: Can you provide some links to the best articles on setting up FX and any other articles that will help with explanations ie JE's that happen within Sage re FX 
 The best I can recommend is to open the sample file and look at the transactions that are generated when you post some purchase and sales entries in a foreign currency, and make transfers from a CAD to USD bank. 
 Once you set up F/X, it will be possible to set up some types of accounts (A/P, A/R, Bank) as having U.S. balances. 
 All accounts (internally) are in the 'home' (CAD in Canada) currency. So your U.S. bank accounts, your A/P accounts, and your A/R accounts will have two balances - the 'home' currency balance, and the 'foreign' currency balance. 
 It is also important to understand that there is no foreign currency information (other than price) stored for inventory, either in the G/L or for the individual items. 
 Courses and tutorials are available, be careful before you buy that they are for the CANADIAN software (the U.S. and U.K. share a name, but that's it) Also, foreign currency is a somewhat advanced topic and some tutorials won't cover it. And some book-keepers are not familiar with it.

RandyW · Answer

Bobcaygeon said: 98% of our inventory is US$ 
 
 Once you buy it, the value is recorded on your books in CAD, regardless of the currency traded between you and the seller. 
 
 Bobcaygeon said: So if I set up FX to use in Sage I am not sure how I would account for the Payables that are sometimes paid from out CDN bank account. 
 
 You would set up a 'clearing' bank account denominated in USD (or if you have an actual account with anyone else that can hold USD, set it up as a USD account, and whether the transfer is automatic or manual, you record the transfer from CAD to USD, and the rate and fees. 
 If you paid a $200 USD bill, and $150 came from your USD account, and $50 was purchased from $67 CAD, you would record the transfer from CAD to the USD account first, then record the $200 US payment. 
 There is also going to be a (monthly or so) reconciliation of the US dollar value on your books, to the current market value of those US dollars in CAD. 
 ----------------------------------------------------------- 
 If you make a USD purchase from a CAD credit card, you could either: 
 1.use the current exchange rate to record the invoice as 'pay later' in USD, and record the payment from the CAD card to the USD vendor when you find out what exchange rate the bank has charged. 
 Or 
 2. Work backwards from the amount in CAD that the bank charges (messy) to get to the proportionate CAD value of the individual items. 
 
 If you make a CAD purchase that gets paid in USD from a CAD credit card, it won't quite work, because you can't enter a different number of CAD dollars for a purchase, than you actually paid.

Sage 50 Canada

Foreign Exchange

Top Replies

COMMUNITY

COMPANY

PARTNERS

SUPPORT & TRAINING