ACCOUNTS PAYABLE FOREIGN EXCHANGE POSTINGS

Currency File (GB0700) Exchange Account, Exchange Difference Debit, Exchange Difference Credit and Unrealized Gain / Loss are exchange control accounts that are used to post for exchanges as the requirements dictates. In addition to the exchange accounts in the Currency File there are also 2 exchange accounts defined in the Bank File (GB0800) .

Currency Exchange Accounts
AP Exchange – Used in A/P Invoice Entry when entering the G/L distribution for a US invoice. The system will automatically create G/L distribution for the exchange amount using this account (considering that there is no vendor override for the exchange account).

Example : An invoice is entered for US$ 100.00 via Invoice Entry (AP1100) program. This invoice will then be processed together with its payment thru the Accounts Payable System. The invoice will be posted to the General Ledger via Accounts Payable General Ledger Update (AP4300) and the payment side thru Account Payable Cheque Register (AP1400).

Lets say that the Currency File AP Accounts and Bank Accounts are setup like below and exchange rate is setup as 1.5 per 1.

The system will automatically insert a G/L distribution entry for the exchange like below. The 1-ap_exch.1.1 is for the exchange amount. Since the exchange rate is at 1.5 the exchange amount for the invoice of $100.00 is $50.00. The other distribution entry of $150 on account 1-1.1.3 is a user entered distribution.

Invoice Entry

When the invoice is posted to the G/L via Accounts Payable – Invoice Update (AP4300) the system will take the above G/L distribution and the AP Regular account from the Currency File (GB0700) as the offsetting account to post a G/L journal for the said invoice. The following screen shot shows the posting that was created when the invoice was updated.

Invoice Posting

When the payment for US$100 is posted to the General Ledger via Accounts Payable Cheque Register (AP1400) program the system will create a journal with the following accounts:

Exchange (GB0700)                50
AP Regular (GB0700)            100
Bank (GB0800)                      -100
Bank Exchange(GB0800)        -50

Payment Posting

If there is a change in exchange rate prior to running the payment posting – Accounts Payable Cheque Register (AP1400), posting will be different to reflect the difference. If the rate goes up then system will post the difference to the Exchange Difference Debit account but if it goes down then it post it to the Exchange Difference Credit account setup in the Currency File (GB0700).

The following screen shows the posting if the rate went up from 1.5. to 1.6 prior to posting the payment.

Payment Posting (Rate Went Up)

The following screen shows the posting if the rate went down from 1.6. to 1.4 prior to posting the payment. In addition to the difference in exchange amount line 2 shows that the Exchange Difference Credit is used if rate change goes down.

Payment Posting (Rate Went Down)

The Unrealized Gain /Loss account on the Currency File (GB0700) is used by Account Payable Re-Evaluation Account (AP7400) to post for exchange gain/loss(creates reversing journal). Gain or Loss is the difference between the old Exchange Rate multiplied by the outstanding amount found on the A/P Invoice and the current Exchange Rate(currently on currency file) multiplied by the outstanding amount. For more explanation please see AP7400 help.

The Bank Exchange Gain/Loss account on the Bank File (GB0800) is used by Bank Revaluation (GB3400) program to post exchange gain/loss (creates reversing journal). Gain or Loss is the difference between the sum of Exchange and General Ledger amounts for given period and the current Exchange Rate multiplied by the General Ledger amount for the same period. For more information please see GL3400 help.