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Multicurrency Overview
In MYOB Accounting Plus, you can enter transactions in a number of currencies, in addition to your home currency, the United States dollar if you like. The Accounting Plus multicurrency features make it easy to record transactions in dollars, pounds, yen or any other currency you use when buying and selling goods and services. Accounting Plus also makes it easy to track overseas checking accounts and foreign assets and liabilities.
If you deal in multiple currencies, it’s also important to track the effects of currency exchange rates on your business. Accounting Plus provides detailed reports to help you manage both unrealized gains and losses (potential changes in the value of overseas transactions) and realized gains and losses (the actual changes in the value of your assets, liabilities and equity that occur when you exchange foreign currency for U.S. dollars).
Simply stated, multicurrency transactions are those that involve any currency other than U.S. dollars. If you import goods from Japan, for example, some of your transactions may be in yen, while others will be in dollars. The MYOB Accounting Plus Multicurrency feature makes it easy for you to track these transactions and account for them properly, regardless of the currency used to complete them. Once you’ve set up Multicurrency, using it is as easy as selecting the currency you want for your foreign-currency transactions.
Multicurrency is optional; if all your business is conducted with customers and vendors in the United States using U.S. dollars, there’s no need for you to take advantage of this feature. If you do want to use Multicurrency, you’ll need to mark the I Deal in Multiple Currencies option in the System tab of the Preferences window. (Once you begin recording multicurrency transactions, you won’t be able to unmark the I Deal in Multiple Currencies option. For more information about selecting the multicurrency feature, see Selecting the Multicurrency option in the Preferences window.)
You’ll also have to perform a number of setup steps, which are described in Setting up Multicurrency. For example, you’ll have to set up special accounts in your chart of accounts to track the transactions you make in each currency. If you plan to make sales in British pounds, for instance, you’ll need to create a separate Accounts Receivable account for your sales to customers in the United Kingdom. Every foreign-currency account you create will require a companion account known as an exchange account to track changes in the value of the transactions assigned to the account. (Exchange accounts are explained more fully in Understanding exchange accounts.)
Only balance sheet accounts -- asset, liability and equity accounts -- can be assigned a foreign currency. All other types of accounts are tracked using U.S. dollars.
Your home currency, U.S. dollars, is set up automatically for you. Because this currency is used to determine the value of all other currencies, it can’t be deleted, and its exchange value is fixed at 1.
Before you begin entering transactions, you’ll also need to specify the proper currency for all your overseas customers and vendors. Only one currency can be used for each customer or vendor (unless you choose to set up multiple cards for them); this ensures that your records remain accurate, and it speeds transaction entry.
For every foreign-currency account you create, there also must be a companion exchange account to track the effects that changes in the exchange rate have on the foreign-currency account. This is known as a “dual-account” approach to multicurrency. Each foreign-currency account must have its own exchange account -- the same exchange account can’t be used for multiple foreign-currency accounts. MYOB Accounting Plus will create an exchange account for you each time you create a foreign-currency account, if you like, or you can specify an exchange account you’ve already created.
Although exchange accounts use the U.S. dollar as their currency, it may be helpful to think of the amounts in these accounts as generic units of money, rather than a specific currency.
For example, assume you’ve deposited ﾣ100 in your British bank account. If the exchange rate is 1.677, your ﾣ100 is worth USD$167.78. Your “British Check” account in MYOB Accounting Plus will show a debit balance of ﾣ100, and your “British Check Exchange” account will show a balance of USD$67.78. The number of monetary units in the two accounts is 167.78 -- which is the value of the account in United States dollars.
You’ll seldom need to make entries in an exchange account—these accounts are updated automatically when you record sales and purchases and spend and receive money. You will need to enter a beginning balance for each of your exchange accounts if the foreign-currency accounts associated with them has a balance. You’ll also update the exchange accounts each month when you record unrealized gains and losses. (These are the potential amounts by which the balances of your accounts have changed as a result of exchange rate fluctuations. For more information about unrealized gains and losses see Recording unrealized gains and losses.)
Once you’ve set up your currencies, you can begin entering transactions for them. Entering these transactions is easy -- they’re just like standard transactions in U.S. dollars.
Multicurrency transactions can be recorded in the following areas in Accounting Plus:
Multicurrency transactions can be viewed throughout Accounting Plus. If you want to change the exchange rate for one transaction only, click the Exchange Rate button to display the Exchange Rate window.
Because currencies continually fluctuate in value, you’ll want to update your currency records periodically. If you record many transactions in other currencies, you may want to update the exchange rates for your currency records often -- every week, or even more frequently, depending upon the volatility of the currency and your desire for precision. These exchange rates will appear as default entries on your Accounting Plus transactions. As with all default entries in Accounting Plus, you can change the exchange rate on individual transactions. Likewise, when you reconcile your checking accounts, you can update the exchange rates assigned to your checks and deposits to reflect the rate used by your bank at the time the checks were cleared or the deposits were made.
Periodically, you’ll want to determine the effect changes in exchange rates are having on your business. Even if you make no changes to an unpaid foreign-currency transaction, its value will be affected when exchange rates change. For example, if the U.S. dollar is valued at a higher level at the end of the month than it was when you made your sale or purchase overseas, you’ll lose some money on your sales, but make money on purchases. On the other hand, if the U.S. dollar is falling in value, sales made earlier in another currency will be worth more in U.S. dollars, but your purchases will cost you more.
Businesspeople generally are concerned with both the potential effect of exchange rates on transactions that haven’t been completed yet and the actual effect on them once they’ve been closed. Read the following sections to learn more about these issues.
If you want to understand the potential effect the exchange rate has on a multicurrency transaction, you need to determine the unrealized gain or loss for the transaction. Unrealized gain or loss affects only open (unpaid) transactions; it reflects the money you’d make or lose by either receiving payment for a sale or making payment on a debt using the current exchange rate.
Businesses typically calculate this amount for all their open transactions at the end of each accounting period and record a General Journal transaction to account for this potential income or expense. Unrealized gains typically are recorded using an income account, such as “Unrealized Currency Gain/Loss,” along with the exchange accounts for your foreign-currency accounts. We recommend that you consult your accountant to determine whether your business needs to track unrealized gains and losses, and if you do, the most appropriate way for you to do so.
To determine the unrealized gain or loss for a particular accounting period, print the MYOB Accounting Plus Currency – Unrealized Gain/Loss report. This report shows the original and current value of your open transactions in U.S. dollars, along with the total gain or loss as of the date you’ve selected.
You can learn more about unrealized gains and losses by reading If you track unrealized gains and losses.
Once a transaction is closed—meaning it’s been paid in full—any unrealized gain or loss is considered realized. It now has an actual effect on your business’s bottom line. Realized amounts are automatically recorded in an income account created specifically for tracking currency gains and losses, along with the exchange accounts associated with your foreign-currency accounts. In MYOB Accounting Plus, the income account used for realized gains and losses is created for you automatically when you set up Multicurrency. Its name, appropriately, is “Currency Gain/Loss.”
Step 1: Select the Multicurrency option in the Preferences window
Step 2: Create records for the currencies you’ll use
Step 3: Create accounts to track your foreign-currency transactions
Step 4: Assign the accounts you’ve created to foreign currencies
Step 5: Assign the appropriate currency to foreign customers, vendors and salespeople
You must complete a number of steps before you begin recording multicurrency transactions in MYOB Accounting Plus. Once setup is complete, you’ll enter multicurrency transactions the same way you enter transactions based on U.S. dollars.
Multicurrency is an optional feature, since many companies using MYOB Accounting Plus deal only in U.S. dollars. To begin using Multicurrency, you need to select the “I deal in multiple currencies” option in the Preferences window.
Click below for the step-by-step procedure:
MYOB Accounting Plus provides you with records for seven commonly used foreign currencies, as well as your home currency, the United States dollar. The following currencies have been set up for you already:
If you do business in any other currency, you’ll need to create a new record for the currency, enter its current exchange rate and indicate how you want amounts in that currency to be displayed. You’ll enter new records using the Currency List window found by choosing Currency List from the Lists menu.
Click below for the step-by-step procedure:
Create records for the currencies you’ll use
In order to track transactions in a foreign currency properly, you must create a number of accounts that are set up to use that currency, rather than U.S. dollars. Later in the setup process, you’ll enter these accounts as the linked accounts for transactions recorded using this currency. You cannot simply use the same accounts you use for your U.S.-dollar transactions, because the dollar and other currencies rarely trade at par with one another. (That is, one dollar rarely buys exactly one monetary unit in any other currency.)
For information about creating accounts, see Choose the type of account you want. Before you begin, though, review If you make foreign sales, If you make foreign purchases and If you track unrealized gains and losses to gain a better understanding of the accounts you’ll need to add to your chart of accounts.
Here’s a list of the accounts you’re likely to need if you accept payment from customers in a foreign currency.
The account you use to track receivables must use the currency of the transactions it will be tracking. The account(s) you use to track taxes collected and paid must use the local currency. Other accounts used to track foreign-currency sales transactions can be assigned either the foreign currency or U.S. dollars. In fact, with the exception of the receivables account, you can use the same accounts that you use to track sales transactions to U.S. customers.
Using separate accounts for each currency will allow you to see more quickly where deposits and the like originated, but if that’s not important to you, you may want to use the same accounts for all your sales.
Here’s a list of the accounts you’re likely to need if you make payments to vendors in a foreign currency:
The account you use to track payables must use the currency of the transactions it will be tracking. The account(s) you use to track taxes collected and paid must use the local currency. Other accounts used to track foreign-currency purchase transactions can be assigned either the foreign currency or U.S. dollars. In fact, with the exception of the payables account, you can use the same accounts that you use to track purchases from U.S. vendors.
Using separate accounts for each currency will allow you to see more quickly where deposits and the like originated, but if that’s not important to you, you may want to use the same accounts for all your purchases.
If you plan to track unrealized gains and losses, you need to create an income account for this purpose. You may want to name it “Unrealized Currency Gain/Loss,” or something similar. We recommend that you consult your accountant to determine whether your business needs to track unrealized gains and losses, and if you do, the most appropriate way for you to do so.
Depending upon your business, you may need to create additional accounts to track foreign check accounts, assets held overseas and the like. If you’re unsure about the accounts you’ll need, your accountant or an MYOB Certified Consultant can assist you with this task.
Once you’ve created accounts to track your foreign currency transactions, you must link them to the currency record they’re associated with. This ensures that transactions are recorded properly and that the balances in your chart of accounts accurately reflect your business activities.
Once your currencies are set up, you must begin assigning them to new customers and vendors who will use them. The selection you make is important, since it determines the currency in which all future transactions for each customer or vendor will be conducted.
You can assign a currency other than your home currency to an employee if you like -- but only if you don’t plan to write paychecks for the employee using MYOB Accounting Plus. If you plan to print paychecks for the employee using Accounting Plus, you must select your home currency for the individual.
Selecting a foreign currency may be useful if the employee is a salesperson who makes all of his or her sales in another currency -- British pounds, for example -- and you don’t plan to use Accounting Plus to pay the employee. When you print reports that show individual salespeople’s sales amounts, the amount will be displayed in whatever currency has been assigned to the salespeople.
Only one currency can be assigned to each customer, vendor and salesperson in Accounting Plus. If you do business with a customer or vendor in more than one currency, you’ll have to create an additional customer card or vendor card for each additional currency in which you do business.
Customers, vendors and salespeople for whom you’ve already recorded transactions are automatically assigned U.S. dollars as the currency in which they conduct business with you. This selection can’t be changed. If you wish to begin using a different currency for these individuals, you’ll need to create a new customer, vendor or employee card for them. This is necessary to ensure that historical amounts for these individuals aren’t misstated.
Click below for the step-by-step procedure:
Assign the accounts you’ve created to foreign currencies
Once you’ve set up Multicurrency, you should rarely need to make changes to your currency records, except to update the exchange rate. If you decide, however, that you’d like to see currency amounts in a different format, or if you’d like to change the linked accounts you’ve assigned to a currency, you can do that. Use the following procedure to make these changes.
Click below for the step-by-step procedure:
If you wish to remove currency records you never use, you can quickly do so with MYOB Accounting Plus.
There are some instances in which you’re not allowed to remove a currency record:
Click below for the step-by-step procedure:
Even before you make or take payment on overseas transactions or withdraw money from a foreign bank account, there is the potential for changes in the exchange rate to affect the value of your transactions and accounts. This potential is referred to as an unrealized gain or loss. For example, if you have a bank account in Paris and the value of the dollar drops compared to the French franc, the value of your Paris bank account goes up; you have the same number of francs, but those francs are worth more dollars than they used to be. Since those francs still are in your bank account, however, you haven’t taken advantage of, or realized, their increased value.
Some -- but not all -- companies need to account for unrealized gains and losses; consult your accountant if you’re unsure whether you need to track this information for your business.
To keep track of your unrealized gains and losses, you’ll print a report and then use information from the report to create a General Journal entry.
In order to accurately calculate unrealized gains and losses for the current month, you must first update the currency’s exchange rate so it reflects the current rate of exchange. If you don’t perform this step, your unrealized gains and losses will be misstated. You can change the currency’s exchange rate to its previous rate after you’ve recorded your unrealized gains and losses. To learn how to update the currency’s exchange rate, see To update foreign currencies
When you track unrealized gains and losses, you make an entry for the current month, then reverse the entry you made in the previous month. It’s important that you remember to reverse the previous month’s entry; if you don’t, gain and loss amounts for future months will be inaccurate.
Click below for the step-by-step procedure:
To print the Currency – Unrealized Gain/Loss Report
To record unrealized gains and losses
To automatically reverse your General Journal entry from the previous month
To manually reverse your General Journal entry from the previous month
From time to time, you may want to transfer funds from a U.S. bank account to a foreign bank account, or from the foreign account to your U.S. account. The quickest way to do this is to make a deposit into the account that will be receiving the funds.
When transferring funds between local and foreign accounts, you must use the foreign currency value of the money, rather than its value in U.S. dollars. This may require you to convert the amount from dollars to the foreign currency. If this is the case, you can use the Currency Calculator window to quickly figure out the money’s value in the foreign currency. To display the Currency Calculator window, choose Currency Calculator from the Accounting Plus Help menu.
Click below for the step-by-step procedure:
To transfer funds from a U.S. account into a foreign account
To transfer funds from a foreign account into a U.S. account
Multicurrency Overview