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Using Currencies in Payments - Exchange Rate Fluctuations

This page describes the posting of exchange rate gains and losses from Payments.

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Often, the Exchange Rate at the time of the Purchase Invoice will be different to that at the time of Payment. Your company will be liable to absorb the profit or loss on the Currency conversion. Because a Payment always uses the Base and Exchange Rates that are valid on the date of the Payment, the calculation of this profit or loss is completely automatic. For example, if you receive a Purchase Invoice for JPY 74539 (Japanese Yen) when JPY 147.62190 buys one GBP (Base Currency 1), you expect at that time to pay GBP 504.93 when you issue a payment. However, when you do issue the cheque, one GBP buys JPY 148.80708, so JPY 74539 will then convert to 500.91. When you specify the Invoice Number in the Payment, 500.91 will be placed automatically in the Bank Amount field:

The gain of 4.02 will be recorded as a Rate Gain and posted to the Rate Gain Account specified on the 'Rate' card of the Account Usage P/L setting. This is shown in the Nominal Ledger Transaction generated from the Payment:

The example Payment Transaction illustrated above includes an additional automatic posting to the Base Currency Round Off Account (as specified on the 'Exchange Rate'card of the Account Usage S/L setting). This posting will be added when necessary by the Dual-Base system only to ensure that the Transaction balances when expressed in Base Currency 2. Values in Base Currency 2 shown on flip B of the Transaction. In this example, Base Currency 2 is the Euro:

When you enter a Payment in which more than one row will post an exchange rate difference, the resulting Nominal Ledger Transaction will usually contain a single posting to the relevant Account (i.e. to the Rate Gain or Loss Accounts and/or the Bank Rate Gain or Loss Accounts described on the Exchange Rates at the Bank page). If you would like such Transactions to contain separate exchange rate difference postings for each Payment row, select the Post Rate Gain/Loss per Payment Line option on the 'Rate' card in the Account Usage P/L setting

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Using Currencies in transactions of various kinds:

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