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Philhx
January 29, 2023
Question

FX gains on USD invoices received in GBP

  • January 29, 2023
  • 1 reply
  • 0 views

Hi All

We invoice a customer in USD. When the customer pays in USD it is automatically converted into GBP by the bank which can lead to FX gains or losses.  Question is how should we account for these gains and losses when matching to the bank receipt.  One suggestion was to raise a CR coded to FX gains/losses but how do you raise a negative (FX gain) credit note?  Is this a sensible approach?

We do have multicurrency however payments are made to the base currency GBP account.

 

Many thanks

1 reply

J
JamaicaA
January 29, 2023

Congratulations on enabling the multicurrency feature, @Philhx. Your case is unique, so it needs a few steps to be taken to record the payments.

 

When creating a customer invoice, the currency showing in the Amount column will depend on the currency you've set up for your customer. That’s why the total for the home currency will only show in the footer section of the invoice. Please know that you can only link transactions with the same currency in QuickBooks Online.

 

To facilitate the movement between two (2) different foreign currencies, let’s create a new dummy bank account in the home currency. I’ll show you how:

 

  1. Go to the Gear icon, then select Chart of Accounts.
  2. Press New.
  3. Select Cash at bank and in hand from the Account Type column.
  4. Under the Detail Type column, select Cash on hand. And under the Name column, type in Dummy Bank.
    https://lithium-response-prod.s3.us-west-2.amazonaws.com/intuit.response.lithium.com/RESPONSEIMAGE/9d2f9fb9-e02f-4018-b5c4-433078bb6151.default.PNG
  5. Before saving and closing, make sure that it is in the home currency (which is GBP in this case).

 

We’ll first have to record payment of the foreign invoice. In the Receive Payment window, set the Deposit To field to Dummy Bank. Before saving the transaction, take note of the home currency (GBP) amount displayed at the bottom right.

https://lithium-response-prod.s3.us-west-2.amazonaws.com/intuit.response.lithium.com/RESPONSEIMAGE/8b610974-1aa9-4871-b3f6-e02bf577f22e.default.PNG

 

Next, we’ll have to transfer this GBP amount from Dummy Bank to the USD bank account.

 

  1. Go to the + New icon and select Transfer.
  2. Under Transfer Funds From column, select Dummy Bank from the drop-down arrow.
  3. Now, in the Transfer Funds To, select EUR Bank from the drop-down arrow.
  4. Select GBP from the drop-down arrow in the Currency column.
  5. For the Transfer amount column, type in the amount.
  6. Under Exchange rate, the exchange rate will automatically appear. But you can manually change the rate.

 

Additionally, you can check out these articles to learn more about this feature:

 

 

Once done, you'll want to review and reconcile your accounts so your transactions in the program match your bank statement. See this guide for the complete details: Reconcile an account in QuickBooks Online.

 

If you have any questions while working with currencies, let me know in the comments. I'll be right here to help you with the customer payments. Have a great day.

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