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VT Transaction+

Navigation: Multi-currency accounting

Multi-currency quick start

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1. Accounting requirements

2. Enter multi-currency transactions for the first time

3. Update the exchange rate

4. Enter transactions at the new rate

5. Year-end revaluation

(For worked examples of multi-currency transactions, see Multi-currency examples)

1. Accounting requirements

Accounting standards normally require that:

a)Foreign currency transactions are initially translated to the base currency (for example GBP) at the exchange rate on the day of the transaction (or an average rate for the week or month if the exchange rate does not fluctuate significantly)*.

b)At the year-end, monetary asset/liability balances (for example bank, customers, suppliers, stock) in foreign currencies are re-translated to the base currency at the exchange rate on the day of the financial year-end. The resulting exchange gain or loss should be included in the profit or loss.

c)Foreign currency transactions in non-monetary asset/liability accounts (for example fixed assets), P&L accounts (for example income and expenses) and VAT accounts, are not re-translated at the year-end and should remain translated to the base currency at the rates at the time of transaction stated in a) above.

d)Exchange gains or losses arising from settlement of monetary transactions (for example payment of an supplier invoice at a different exchange rate to that of the invoice) should be included in the profit or loss.

Multi-currency accounting in VT Transaction+ is designed to meet these requirements. To enter foreign currency transactions, follow the steps below in order.

*If you enter transactions in foreign currency that are subject to VAT, you should use the rates on HMRC's website.

2. Enter multi-currency transactions for the first time

2.1. Set the exchange rate

1.Select Set Up > Currencies, Departments and Lists > Currencies > New.

2.Enter the name of the currency, the abbreviation and rate to the base currency, then click OK:

New currency

3.Click on No ledgers are currently analysed by the above list. Change...

Ledgersexchange

4.Tick the ledgers that you want to be analysed by currency and click OK. The ledgers that are ticked in the screenshot below are those that can be analysed by currency. These are monetary assets and liabilities.

Typically, you might analyse the stock, bank, customer and supplier ledgers by currency. You should not analyse a ledger by currency unnecessarily, as you will then have to select a currency when you first use an account.

Ledgers_analysed

2.2. Create any foreign currency customers/suppliers

Select Set up > Accounts > Customers/Suppliers > New and entering the required details.

The foreign currency is assigned to a customer/supplier when you enter the first transaction to their account. This is done by selecting the currency from the currency drop-down in the transaction entry screen.

2.3. Create any foreign currency bank accounts

Select Set up > Accounts > Bank > New and enter the required details.

The foreign currency is assigned to the bank account when you the first transaction to that account. This is done by selecting the currency from the currency drop-down in the transaction entry screen.

2.4. Enter a foreign currency transaction

1.Check that the current exchange rate is the one that want to use - to view the current rate, select Set up > Currencies, Departments and Lists > Currencies.

2.Enter transaction in the normal way (see Transaction entry methods) but select the currency from the currency drop-down in the transaction entry screen:

Select_currency

If the currency drop-down does not appear, make sure you have completed all the steps above.

The transaction is recorded in the accounts at the foreign currency amount translated to the base currency at the current exchange rate set in 2.1. Set the exchange rate.

For example, an invoice for EUR 1,000 entered when the exchange rate is set at 1.12 EUR to 1 GBP, is recorded in the accounts at GBP 892.86. Entries in the transaction to P&L accounts (for example income and expenses), VAT accounts, and non-monetary asset/liability accounts (for example fixed assets), remain translated to GBP at the rate when the transaction was entered and do not change when a currency revaluation is performed. This satisfies accounting requirement c).

Accounting requirement d) is satisfied as explained in Exchange differences on payments of invoices.

Note that foreign currency transactions cannot be entered using the P+R transaction or the Universal Input Sheet.        

Once you have entered the first transaction to an account in a particular currency, all subsequent transactions to that account will be denominated in that currency. This cannot be changed.

3. Update the exchange rate

Update the exchange rate as often as is needed to meet accounting requirement a). If you choose to use an average rate for the month, it is best to enter this rate with a date at the beginning of the month before you enter any transactions for that month.

1.Ensure you have entered all transactions that need to be entered at the old rate before updating to the new rate

2.Select Display > Currency revaluations* > New currency revaluation

3.Select the currency, enter the date and the new rate.

*The currency revaluation function serves the purpose of both updating the current exchange rate and revaluing monetary asset/liability accounts.

For example, to change the rate for February 2024 to 1.13:

revalue_currency2

Currency revaluations should be performed in date order.

If you require further details of how the currency revaluation function works, see Currency revaluation.

4. Enter transactions at the new rate

This is done in the same was as described in 2.4. Enter a foreign currency transaction.

5. Year-end revaluation

To satisfy accounting requirement b), monetary assets and liabilities can be revalued at year-end using the currency revaluation function (which serves the purpose of both updating the exchange rate and revaluing monetary assets and liabilities).

1.Select Display > Currency revaluations* > New currency revaluation

2.Select the currency, enter the year-end date and the rate

For example if your year-end is 31 December 2024 and the exchange rate on that date is EUR 1.17 to 1 GBP, enter the new rate of 1.17 with a date of 31 Dec 2024.

revalue_currency_ye

When you click Save, balances in foreign currency accounts (in ledgers that have been ticked in ledgers analysed by currency) are re-translated to the base currency (assume GBP) at the new rate.

The exchange difference between the balances translated to GBP at the new rate and the old rate, is recorded in the P&L account - Exchange differences and charges. This is an automatic entry called a currency revaluation transaction (which has a CRV prefix). The revaluation transactions can be displayed by selecting Display > Currency revaluations. On the currency revaluation page, there is also a revaluation report, which shows the revaluation on each account.

If you require further details of how the currency revaluation function works, see Currency revaluation.