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How can I handle the occasional transaction in a foreign currency in QuickBooks EasyStart 2008 or later?

QuickBooks 2008 and QuickBooks 2009 does not have a multicurrency feature and does not natively handle transactions in a foreign (non-Canadian) currency. All transactions in QuickBooks 2008 or QuickBooks 2009 must be entered in Canadian dollars (CAD), including sales, purchases, and inventory costs. However, it is still easy to handle the occasional foreign currency transaction in QuickBooks 2008 or QuickBooks 2009 with the following guidelines.

Tip: If you do a lot of business in foreign currencies, or if you have bank accounts in a foreign currency, you may want to use QuickBooks Multicurrency Edition.

Set up your company file to track foreign currency transactions

Before entering transactions in a foreign currency, set up a new "Exchange Gain/Loss" expense account and a new Other Charge item. Use these to track the differences in currency conversion rates between the starting and ending dates for a transaction (such as between the time a customer gives you a cheque in a foreign currency and when you deposit the cheque in your bank account).

  1. Go to the Company menu, choose Lists, and then click Item List.

  2. Go to the Edit menu and click New Item.

  3. Make the following changes:

    • In Item Name, enter "Exchange Gain/Loss".

    • In Tax Code, erase the existing code so that the field is blank.

    • Leave the Price at 0.00. Manually enter this amount each time you use this item.

  1. While still in the New Item window, click the Account list box and then click < Add New > at the top of the list.

  2. In the Add New Account window, make the following changes:

    • In Account Type, select Expense.

    • In Account Name, enter "Exchange Gain/Loss".

    • In Tax-Line Mapping, select Not Tax Related.

  1. Click OK to close the New Account window, then click OK again to close the New Item window.

Enter a foreign currency transaction using the Exchange Gain/Loss account

Let's say you give Bob an invoice, with the costs converted to US dollars (USD). (Note that since QuickBooks supports only Canadian dollar amounts, you'll have to create and print a separate copy of this invoice outside of QuickBooks.) A few days later, he gives you a cheque for the full amount (in USD) and you deposit the cheque in the bank that afternoon. To handle this in QuickBooks in QuickBooks Pro and Premier, follow the steps below::

  1. Enter the invoice in QuickBooks.

    Since QuickBooks supports only Canadian dollar amounts, before you enter the amount for the transaction, manually convert the amount to Canadian dollars (CAD). Use the conversion rate at the date and time that the transaction took place. In the invoice, enter a memo about the exchange rate that you used.

  2. When the payment arrives, take it to the bank and convert it to Canadian Dollars (CAD). The bank will tell you the exchange rate they're giving you.

  3. Manually calculate the difference between what the customer actually paid in CAD and the CAD amount on the invoice.

  4. In QuickBooks, go back to the invoice entered for the transaction and add the Exchange Gain/Loss item to the invoice. For the Amount of the Exchange Gain/Loss item, enter the following:

    • If the customer's payment was greater than the invoice amount, enter the difference between what the customer paid and the invoice amount as a positive amount.

    • If the customer's payment was less than the invoice amount, enter the difference between what the customer paid and the invoice amount as a negative amount.

      The amount of the invoice should change to equal the payment.
  1. Update the memo to include information about what exchange rate the bank gave you.

  2. Go to the Receive Payments window and enter the amount of the payment in CAD.

When you reconcile your accounts at the end of the month, you can use the information you track in the Exchange Gain/Loss account to balance your records against your bank statement.

This process works essentially the same for bills. First enter the bill in QuickBooks, converting the amount to CAD. When you pay the bill, update the bill in QuickBooks to use an Exchange Gain/Loss item with the appropriate gain or loss due to the exchange rate.

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