Foreign Currencies

Foreign currency accounts can be handled with as much ease as your local accounts. The only additional task is to specify an exchange rate when entering a transaction. Your cash books and supplier and customer accounting systems can process foreign currency accounts, so it is possible to accept a supplier invoice or enter a customer payment in an overseas currency.

Since the default basis for the unit of calculation in CAPITAL is always the Australian dollar, the value of an overseas transaction is recorded in both the foreign currency and (using the specified exchange rate) the local currency. Exchange rate fluctuations regularly cause gain or lose on a transaction. This gain or loss is calculated automatically upon final payment of the transaction. You may print a foreign currency gain/loss report (or even have the variation automatically posted to the general ledger if you are using it.)

CAPITAL's ability to keep track of both local and foreign currencies simultaneously allows you to inspect both the overseas amounts and Australian dollar amounts at the press of a button. Perform the following steps to get the foreign currency system up and running:

1. Tell CAPITAL you wish to work with foreign currencies. Start the INSTALLATION Workshop program, go to Install|Advanced|GL & Foreign Currency. Make sure that foreign currency processing is activated for the applicable company.

2. Put the currency information you intend to work with in the Exchange Rate Table. Add any missing currencies or edit and input the correct/most recent exchange rates.

3. Enter your foreign supplier or customer accounts. Be sure to specify the currency of the account in the Currency field. (Normally found on the second page of your account's master record.)

Now, when a transaction is entered via customer or supplier transaction entries, you will be prompted for an exchange rate. The rate entered in the foreign currency table will act as the default, but you may override this and input a different exchange rate if you wish.

Entering Exchange Rates

The exchange rate is entered as a divisor calculation. In other words, if the foreign currency amount entered in the Amount field is Deutchmark 300 and the exchange rate entry was .91, CAPITAL would add $329.67 to the account as being outstanding in Australian dollars and DM300 in German Marks. That is:

300 / .91 = $AUD 329.67

You can also specify that the exchange rate should be entered as a multiplier and this can be changed via INSTALLATION Workshop.

Maintaining Foreign Currencies in Stock Control

A common way of keeping track of overseas purchase costs is to assign a price field in Stock Control to represent your overseas (typically freight on board) cost. For example:

Price A - "Foreign"

Price B - "Last Cost" (Converted to $AUD dollars, your last paid price.)

Price C - "Average" (Converted to $AUD dollars, average cost.)

Price D - "List" etc...

You may also wish to specify an overseas sell price if you will be billing in foreign currencies.

The advantage of this system is that since (in most cases) companies do not purchase the same stock item from different countries, a single price field can be used to keep track of an unlimited number of foreign currencies. If you only purchase from the US, for example, then price A could be renamed "$US cost".

Hints & Tips

It is generally recommended that you set-up the invoicing system so that Australian dollar costs are used when invoicing in a foreign currency. Most reports in CAPITAL assume costs are in $AUD dollars. (You can always work out the foreign currency cost by multiplying the cost by the exchange rate, for example.)
When using the invoicing system and foreign currencies, only tax free invoicing is allowed. If the exchange rate is not 1, CAPITAL will switch invoice GST calculations off automatically.
Remember to issue credit/adjustment notes with the same exchange rate as the original transaction when applicable. Otherwise an exchange rate variance may (of course) be unjustifiably calculated.

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