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ACCOUNTS RECEIVABLE 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

AR Exchange – Used in Order Update (OE4100) for a US customer Order.  The system will automatically create G/L  postings for the exchange amount using this account

Example: An order is entered for a US$ Customer for 100.00 via Order Entry (OE2100) program.  The resulting invoice will then be processed to the Accounts Receivable System. The invoice will be posted to the General Ledger via Invoice Update (OE4100)

Lets say that the Currency File (GB0700) AR Accounts and Bank Accounts (GB0800) are setup like below and exchange rate is setup as 1.5 per 1.


a

b
Invoice Posting
When the invoice is posted to the G/L via Invoice Update -  (OE4100) the system will post as follows:  With reference to the AR accounts above, the 1-ar_exch.1.1 is for the exchange amount.  Since the exchange rate is at 1.5 the exchange amount for the invoice of $100.00US is $50.00.  The other entry would be to the AR regular account 1-1.1 for $100.  The Sales account (GB4300, based upon the reason code / product group / warehouse combination) would have the full amount of the invoice in home currency posted to it.

Debit     – Exchange (GB0700)                            50
Debit     – AR Regular (GB0700)                          100
Credit    – Sales (GB4300)                                  -150

(Inventory and cost of goods sold are posted with cost of item in home currency.  In this example $85)

c
Receivable Payment Posting

The customer now has a US$100.00 outstanding receivable.  When the payment for US$100 is received, it is entered in Cheque File Entry - AR2100 to a US bank (Application will only allow entry into a bank with same currency as the customer).  Cheque File Entry – (AR2100) posts to the G/L as follows:

Debit     – Bank (GB0800)                                   100
Debit     – Bank Exchange (GB0800)                    50
Credit    – Unapplied Cheque  (GB0700)               -100
Credit    – Unapplied Cheque  (GB0700)               -50
d

Cash application applies the cheque from the customer to outstanding invoices and posts to the G/L the following transactions:

Credit    – Exchange (GB0700)                            -50
Credit    – AR Regular (GB0700)                          -100
Debit     – Unapplied Cheque  (GB0800)               100
Debit     – Unapplied Cheque  (GB0800)               50

 
e
Exchange Rate Change between transaction postings

If there is a change in exchange rate prior to Cheque Entry -  (AR2100) and/or Cash Application -  (AR3100) then the following posting will be included:

If the rate goes up then system will post the difference to the Exchange Difference Debit account but if it goes down then it will post it to the Exchange Difference Credit account.  These accounts setup in the Currency File (GB0700) based upon currency branch combination.

The following postings would occur if the rate changed after cheque entry and prior to cheque application.

Payment Posting (Rate Went Up from 1.5 to 1.7)
Cheque File Entry – AR2100 would still post exactly the same:

Debit     – Bank (GB0800)                                   100
Debit     – Bank Exchange (GB0800)                    50
Credit    – Unapplied Cheque  (GB0700)               -100
Credit    – Unapplied Cheque  (GB0700)               -50

Cash application applies the cheque from the customer to outstanding invoices and posts to the G/L the following transactions:

Credit    – AR Regular (GB0700)                          -100
Credit    – Exchange (GB0700)                            -70
Credit    – Exchange Difference Credit (GB0700)   -20
Debit     – Unapplied Cheque  (GB0800)               100
Debit     – Unapplied Cheque  (GB0800)               70
Debit     – Exchange (GB0700)                            20
 
f
Payment Posting (Rate Went Down from 1.5 to 1.2)

Cheque File Entry – AR2100 would still post:

Debit     – Bank (GB0800)                                   100
Debit     – Bank Exchange (GB0800)                    50
Credit    – Unapplied Cheque  (GB0700)               -100
Credit    – Unapplied Cheque  (GB0700)               -50

Cash application applies the cheque from the customer to outstanding invoices and posts to the G/L the following transactions: (difference being that it would use the Exchange Difference Credit account for the currency)

Credit    – AR Regular (GB0700)                          -100
Credit    – Exchange (GB0700)                            -30
Credit    – Exchange Difference Debit (GB0700)    -20
Debit     – Unapplied Cheque  (GB0800)               100
Debit     – Unapplied Cheque  (GB0800)               30
Debit     – Exchange (GB0700)                            20

The Unrealized Gain /Loss account on the Currency File (GB0700) is used by Account Payable Re-Evaluation report/posting - (AR6400) 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/R Invoice and the current Exchange Rate (currently on currency file) multiplied by the outstanding amount.  For more explanation please see AR6400 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.