Hi, I am attending a book-keeping job which is set up with a currency variance account, I get the rough idea of this, they have a dollar bank account. Any tips on this as I haven't used it before? (I will have someone with me to "show me the ropes" but any tips to give me a headstart)
Hi Tony, you just need to be aware that a USD invoice can be translated into GBP at one rate, but paid at another.
Some companies with very low numbers of FX activity may prefer to wait until the invoice is paid, then process the invoice at the payment rate, but if there are long credit terms, this can mean that invoices remain unprocessed for a while.
Nick is correct about how bookkeepers process currency invoices, especially if its paid into a sterling bank account, but if they money is being paid into a currency account - then this is the simplest way I found of doing of doing it:
1. Post the invoice straight away at the current exchange rate e.g. $1,600 @ 1.5 = £1,066.67
2. When they money arrives in the currency and is paid into a currency bank - post the amount exactly the same as the invoice onto the the US$ bank account account (e.g. £1,066.67)
3. Depending on the balance in the US$ account - revalue it at the end of the month/quarter - the higher the balance or the larger number of transaction the more it will need to be done.
e.g. If there is US$1,600 and the rate is now 1.6 then the balance in the account will need to be adjusted so it is £1,000 - so you would reduce the bank account balance by £66.67 and credit the currency variance account. Of course if the adjusted balance is higher then you would incredase the bank account balance and debit the currency variance account.
-- Edited by YLB-HO on Tuesday 1st of March 2011 08:12:54 PM
I do it similar to Frauke, if its an invoice that is paid relatively quickly I just wait for the bank statement and adjust it to GBP, so all is correct, if not I have created a Currency Variance code in SAGE, and post the differences to there, we don't have very many, then the accountant makes the adjustment at the end of the year. We work with a GBP bank account, also we don't have mullti currency set up on Sage instants (not sure there is one anyway on the one we use).
Cheers-this has been most helpfull. I assume that, as there is a Dollar bank account and variance account then Frauke's method looks the one to use. I will see how this has been done previously and if it appears to mirror this and make sense, I will go with that.
Hi all that replied! Received the sage back up today, doing job in the morning! Had a look and it appears that it is simply a dollar account that receives payments in dollars for sterling invoices hence the currency variance account. Looks easier than I first thought, but we shall see tomorrow.
