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Brendan7791
August 6, 2022
Question

Questions about QBO multicurrency - exchange fees and exchange gains & losses

  • August 6, 2022
  • 1 reply
  • 0 views

I have a few questions about QBO multicurrency when dealing with exchange fees and exchange gains/losses. To begin I've described my Scenario below:

 

- My business is based in Canada and my home currency in QBO is Canadian Dollars (CAD). Multi-currency is enabled in my QBO account.
- I sometimes purchase inventory using a Canadian credit card (based in CAD), from a US based supplier and I'm charged for that inventory in USD . I pay for the inventory all up-front at the time of the purchase.
- At the time of purchase I'm also charged a 3% conversion fee by the credit card company for completing the foreign currency transaction. Their fee is factored into the exchange rate they offer me - it does not appear as a separate charge.
- When recording the purchase transaction in QBO, I adjust the exchange rate to reflect the actual exchange rate I was charged (vs the default exchange rate in QBO) and record it as an inventory purchase.
- I then sell the inventory from my US supplier and I'm also paid for it in USD.
- The USD revenue from those sales is deposited into a USD bank account, therefore no conversion fee is applied since the there is no second conversion back to my home currency at that point.

 

These are my questions:

 

1) Right now the total cost of the inventory purchases including the 3% conversion fee is simply recorded into my inventory account. The 3% fee is factored into my per-unit cost of goods sold, and the corresponding amount is deducted from inventory as a COGS for each item when it is sold. However, I'm not sure if that is an acceptable way of handling that amount. Is it?


2) Is there a way of tracking the accumulated expenses from the 3% conversion fee imposed by the credit card company on USD purchases (for inventory or otherwise) since it is factored into the exchange rate they offer (vs the default exchange rate in QBO)?


3) Since the inventory is paid for up-front I don't believe there should be any exchange gain/loss recorded at that time, the conversion fee is a separate issue. Is this correct?


4) From what I understand there would be nothing recorded in the exchange gain/loss account since the sales of the USD inventory remain in USD. Until those assets are converted back into CAD no foreign exchange gains or losses have been realized and therefore would not appear in the exchange gain/loss account in QBO. The exchange gain/loss would be recorded when USD cash is actually converted back to CAD cash and the currency fluctuations are realized, and until that point it would only appear in the unrealized gains & losses report. Is that understanding correct?

 

Thanks for any help you can offer!

1 reply

Jen_D
Jen_D
August 8, 2022

Thanks for reaching out to us regarding this Multi-currency concern, and for sharing a detailed description of the issue, @Brendan7791.

 

I can share some information on how to handle this concern in QuickBooks.

 

For your first concern, we always recommend that you contact an accountant to help account for the conversion fee. Here in this forum, we can only provide the steps you can do in QuickBooks, but handling your books is best assisted by your accountant.

 

If you don't have one, we can help you find someone to help in your area. You can visit the following link to locate accountants based in Canada: https://quickbooks.intuit.com/ca/find-an-accountant/.

 

You can do it the way you're doing, if your accountant agrees. Otherwise, when you record the bill of the purchased inventory, you may use a service item to add the 3% conversion fee. This way, the fee will not be mixed up with the inventory.

 

For the second concern, it depends on how you record the 3% fee. If you create service item and used it to enter the 3% fee with the bill, you can run a report for the item so you can get how much you paid for the conversion.

 

With regards to your third question, yes, there shouldn't be any gain/loss at the time, otherwise there is a change in the conversion rate. And lastly, yes, you're correct.

 

Please refer to the following links to learn more about the Multicurrency feature in QuickBooks:

 

Visit us anytime if you need further help with this Multicurrency concern. I'm delighted to share some more insights with you. All the best!

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