If you purchase goods or services from another country you can create the vendors, or suppliers in that currency in order to properly record the transactions.
You can also set up a credit card or bank account in the same currency to reduce your exposure to currency fluctuations, and exchange the funds when the exchange rate is favourable.
In this week’s video blog I show you how to set up a supplier in another currency, and also a credit card account in QuickBooks Online.
At the end of the video you will be able to see how the transactions flow through to your income statement. This is often confusing, so be sure to watch to the end so you can understand how the transactions are processed.
Hi! Kerry here from MyQuickBookKeeping.
Today, I’m going to show you how you can assign a different currency to your suppliers or vendors, and then, to a credit card. Then you can pay those suppliers using that credit card. Be sure to watch right to the end, because then we’ll run the profit and loss or income statement. We’ll see how those transactions appear and how currency fluctuations are reflected in your results.
In a previous video, I’ve walked through the steps to turn on multicurrency. If you’ve not yet turned it on you can access that video and come back when you’re ready. A really common concern users of QuickBooks have about multicurrency is how to set up the accounts receivable and accounts payable in different currencies. QuickBooks actually does this for you like magic. I’ll walk through an example so you can see the result.
Go to the Expenses tab and select Suppliers. In the right hand corner, you can set up a new supplier. So let’s name our company USD Supplier. It’s important now that you select the currency for this supplier. After you’ve saved it, it will be too late. So we go here now and choose USD. Save.
Now, we’re going to purchase something from our new supplier. Let’s go here and enter a bill. We’ll choose our USD supplier right here. And the exchange rate to Canadian dollars is displayed. All of the fields below are now in US dollars. Note that the exchange rate is displayed automatically. We’re going to put the date for our bill as November 30th. And when we change the rate, the exchange rate is updated also.
We’re going to purchase some supplies. Let’s set supplies for $10,000. We will ignore sales tax for the purpose of this example. And this should enable us to track the exchange rate variants. The cost down here is displayed in both US and Canadian dollars and that’s calculated using this rate up here. Save this.
Now, I like to have a credit card or bank account in any currency I use often. So let’s use a US dollar credit card, and if nothing else, it will come in handy for our cross-border shopping. Choose Accounting on the left hand margin and then we select New on the top right corner. The Category Type and Detail Type will both be credit card. Let’s name it US dollar credit card. Now, be sure to select the currency before you save. Okay? Now we have a new account set up.
Now, let’s go up and pay our bill using that credit card. Under paid bills, I don’t save it. So let’s change the currency to US dollars. There we go, our bill appears. I’m going to pay it with the US dollar credit card today. Here it is. The exchange rate is displayed and the amount of the payment is shown in both Canadian. Oh I haven’t selected the bill. Now the amount of the payment is displayed in both US and Canadian. You can make a payment from a Canadian account if your bank allows it. Once we’ve done this, we save.
Now I’d like to show you the income statement so you can see the impact that currency movement has had on our transactions. Have a look down here. We have an amount in supplies in Canadian dollars. Now this is using the rate in effect when we purchased the goods on November 30th. And further down here, we have an exchange difference. It’s being calculated as the difference between the rate on the date we purchased the goods and the date we paid for them. So if we click through to this account, we can see that it was credited 346.25 when we paid our US supplier. Everything is being calculated for you. You don’t need to do anything other than enter the transactions as they occur.
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