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Multicurrency conversion

McCarthy1

I am in New Zealand and have a Foreign Currency bank account (Australian)

In the ledger the balances appear in NZ Dollars, which is fine.

When I input all the transactions, converting to NZ Dollars, my ledger account does not agree with my bank balance. The difference is made up of the accumulated differences between the 2 currencies transactions.

Before I used multi currency I would credit or debit the difference to a Foreign Exchange Income account. But now that MYOB converts everything to NZ dollars I dont do this.

Is there something I need to do each time I convert funds, so that the bank account and ledger account agree. I understand there will be a difference (the difference between NZ$ and AU$) but on a $400 bank balance, my ledger is $10000.

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Accepted answers

Mike_James

Hi @McCarthy1 , the $4844.76 represents an unrealised gain, which you can journal to your MYOB account, resulting in a closing balance of $362,871.16. This is also the AUD balance of $344,727.60 div by .95. I would normally take the AUD and work out what it is worth in NZD then compare to the ledger.

The journal will debit the AUD bank account and credit your currency variance account in the P&L.

All comments

McCarthy1

Thanks for that but mine is a bit more complicated.

I use .95 are the default rate but when the money is transfered from AUD acc to NZD account I put in the actual conversion rate

I have attached a spreadsheet to try and explain myself.

The 1st 2 columns are the ledger account for the Forex acc

The next 2 are the actual bank statement figures

The 3rd 2 columns are the actual Foreign exchange income when transfered to the NZ bank account. So you can see the rate varies from .95 to 0.97.

So my ledger balance is NZ$358,026.40

My bank balance is AU$344,727.60

To know that my ledger account is correct and agrees with my bank account I would expect the $NZ358,026.40*.95 = $340,125.08

But

The bank balance is $344,727.60 converted to NZ$ would be $362,871.16

There is a difference of roughly $4,844.76

I have reconciled the bank account so I know it is correct.

Should I transfer that difference to a Foreign Exchange income or ex[pense account each month so I know the bank ledger account is correct?

Should I transfer the difference

Book1.xlsx

Steven_M

Hi @McCarthy1

The balance of a foreign currency account in Accounts>>Accounts Lists is that of the local currency amount, whereas the balance of the account in Banking>>Reconcile Accounts is that of the foreign currency amount.

For example, below is a screenshot that I've shared for another client but it does show what is occurring i.e. the local currency balance in the accounts lists and the foreign currency in the Reconcile Accounts.

Lara10

Following - similar issues here - have asked MYOB also, there doesn't seem to be a clear answer ....