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VT Transaction+

Navigation: Multi-currency accounting

Objectives

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Multi-currency accounting in VT Transaction+ is designed to meet the following objectives, which comply with company law and accounting standards:

1.One should be able to readily ascertain the currency amount of customer, supplier, bank and other monetary assets and liabilities denominated in currency

2.When preparing accounts, currency denominated monetary assets and liabilities should be translated into base amounts at the rate ruling at the balance sheet date (and not the rate ruling when the transaction was entered into). The currency amount of these items is fixed, but the base amount varies depending on the date for which you are preparing accounts

3.Profit and loss entries, VAT entries and non-monetary assets and liabilities should be translated at the daily or average rate for the period in which they occur (depending on whether the rate fluctuates significantly). The base amount of these entries is fixed

4.Exchange gains or losses arising from the retranslation of monetary assets and liabilities should be included in the profit and loss account as part of ordinary activities

 

To comply with 3. the FX rate in VT Transaction+ needs to be set to either the rate at the date of transaction or the average rate. The rate is set in VT Transaction+ as follows:

when you first set up the currency by selecting Setup>Currencies, departments and lists>Currencies>New;

then updating it as required by selecting Setup>Currencies, departments and lists>Currencies>Revalue currencies. If you are using an average rate for the month or period, you would perform this step once a month or period. If you are using a daily rate, you would perform this step daily (or at least each day there is a foreign currency transaction)

To comply with 2. the FX rate in VT Transaction+ needs to be set to the rate at the balance sheet date. The rate is set in VT Transaction+ as follows:

updating it by selecting Setup>Currencies, departments and lists>Currencies>Revalue currencies. To comply with accounting standards this only needs to be done for the date of the end of the reporting period, but in practice you may also want to do this at the end of each month, if you produce monthly management accounts.

Objectives 1. and 4. will then be met automatically in the software as a result of the steps above.

NB: Once you have revalued the currency, do not enter any foreign currency transactions prior to the date of revaluation.

To see how multi-currency works in practice in VT Transaction+, please refer to the Multi-currency examples.