Currency Gains and Losses in QuickBooks Online

If you have watched the prior videos about how to set up and record multi currency transactions in QuickBooks Online you may be wondering how the foreign currency exchange gains and losses are calculated and recorded.  In this video I purchase supplies from a foreign currency vendor, and then pay them from my home currency and watch how the exchange difference results from the shifting currency rates.

Be sure to watch to the end and you will see how this is reflected in our income statement or profit and loss.

Video Transcript:

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Hi! Kerry here from MyQuickBookKeeping.

Today, I’m going to show you how currency variations are calculated in QuickBooks Online and how you can assign different currencies to transactions at the time you record them.

If you’re not familiar with QuickBooks Online, you might be tempted to just enter everything with a 1 for 1 exchange rate thinking that you can recalculate and can clear it up at your end, or if you’re an accountant that you clear it up at year end. There’s no need to do this.

Multicurrency in QuickBooks Online works seamlessly if you just know how to use it. So I’m going to follow through so you can see how those transactions work.

I’m going to enter a bill from a US dollar supplier on June 30th. I can now either use the exchange rate provided by QuickBooks or adjust it. For this exercise, I’m going to choose a nice round 1.3 so it will be easier to track the movement later.

Note that there’s a warning, I’m using this rate for this transaction only. The supplies purchased, $10,000 USD is now calculated as $13,000 CAD. Note that this is the amount that will appear in all of our reports. All reports are displayed in the home currency. So let’s have a look.

Let’s have a look in the profit and loss. We now have an expense for supplies of $13,000. Let’s have a look in the balance sheet also. Scroll down here. We have accounts payable, it says USD, for $13,000. It can be a little bit confusing because of the notation of the account, but the amount is displayed in Canadian dollars. The accounts payable accounts are separated by currency. This is automatically set up by QuickBooks.

Now, let’s pay the supplier, many months later. Not necessarily a good practice but we want to see how the rate change impacts our reporting. Under Pay Bills, you must select the currency of the bills we’re paying. In this case US dollars. Our US dollar supplier is right here. Now I’m going to pay them on November 30th, and the exchange rate has changed.

I’m going to use my Canadian dollar account to pay them. And I know that the rate the bank is going to give me is not the same as the rate projected by QuickBooks. So here’s a reason why we’d make a change. I’m going to use a nice round of 1.25. So we can easily see the exchange difference in our reports. We’re paying from a Canadian dollar account and we can see the amount of the payment is $12,500. The USD amount is $10,000, which is what’s being calculated at that rate of 1.25 that we specified.

Now let’s look at our income statement. The exchange gain or loss is being calculated automatically as $500. This is the difference between the 1.3 when we purchased the supplies and the 1.25 when we paid them.

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