Exchange rate question

Question

Hi All, 
 Our company bought inventory from USA and I received an invoice from the supplier. I tried to input the invoice in S.A, but I don't know what exchange rate should I enter. Is it the rate that the container come across the border? or the rate that we received the container? can someone help me on this? 
 Thanks in advance. 
 Motor

RandyW · Accepted Answer

Generally for financial purposes, you can use the Bank of Canada noon rate as of the first date that you are able to pay for the goods. 
 Any exchange gain / loss from that point on (or previous to that point) is the result of administration choices. It's not directly connected to cost-of-goods-sold and inventory valuation. 
 If sales tax is included on the vendor invoice, the CAD $$ value for GST will be affected by the rate you choose, so follow CRA guidance. 
 If sales tax is assessed and paid through the broker, then the rate you use has no effect on sales tax, but can affect income tax, so you should make sure the rate you use correct per CRA rules.

Moto · Answer

Thanks for your reply, RandyW. 
 If the invoice will be paid 2 months later on the date I received it, what exchange rate should I input in simply accounting? 
 Exchange rate really affect the income statement. 
 Motor

RandyW · Answer

The exchange rate at payment is entered as the rate at the point in time that you pay it. 
 It is this rate that determines whether you have an exchange gain or loss booked for the overall transaction. 
 You will also have to periodically revalue your USD bank account, so that the fiscal period end value is correct in the foreign and Canadian currencies.

Alwyn · Answer

Moto: This sounds like you are using only single currency in Sage 50 CDN. If this is the case then I would book the invoice in Canadian dollars using the exchange rate on the date of the invoice. When you go to pay the invoice (2 months later) you will likely get a bank draft, or similar, in US dollars. The Canadian equivalent, using the same rate as the bank draft would be book as the payment amount in Accounts Payable. This would leave you with a small balance, either positive or negative in the A/P account which can then be cleared out through an adjusting invoice (credit note) and charged to an account for gain/loss on currency conversion. 
 If the vendor has not charged G/HST then your broker will charge it but the taxes will all be in Canadian dollars.

RandyW · Answer

If you are, in fact, not using multi-currency in Sage 50, then my recommendation would be to switch it on, if necessary upgrade to a version that has multiple currencies.

Alwyn · Answer

RandyW, I would in theory agree with turning on dual currency but why? If it is required on a regular basis yes but if only used once a year, why? The original post implied to me that they have been operating for a period of time and have just purchased from the US for the first time. Not sufficient need for dual currency unless the purchase is going to be repeated more than once a year. Dual currency works best with a second bank account in the second currency but this did not appear to be the case for the original post.

Sage 50 Canada

Exchange rate question

COMMUNITY

COMPANY

PARTNERS

SUPPORT & TRAINING