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McCarthy1's avatar
McCarthy1
Experienced User
5 years ago
Solved

Multicurrency conversion

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.

  • Mike_James's avatar
    Mike_James
    5 years ago

    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.

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  • Steven_M's avatar
    Steven_M
    Former Staff
    5 years ago

    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.

     

    • McCarthy1's avatar
      McCarthy1
      Experienced User
      5 years ago

      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

      • Mike_James's avatar
        Mike_James
        Ultimate Partner
        5 years ago

        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.

  • Lara10's avatar
    Lara10
    Experienced Cover User
    5 years ago

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

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