Hello. My company received a loan in foreign currency in multiple tranches over a period of time. The amount was fixed in the contract at a specific rate (e.g. 61.96RUB:1USD) and received in RUB but repaid in USD with interest (the interest part is not an issue here).
The problem is that even though the correct amount has been repaid there is still a difference shown in the account caused by the discrepancy between the official exchange rate and the exchange rate of the loan the parties agreed upon (pic attached).
One way would be to just change the rate in the Manager exchange rate setting but I am curious whether there is a better way of recording this transaction. Is there a way to balance the account with exchange gain/loss? Thank you.
The exchange rate in Manager must be the actual exchange rate (from your central bank, your bank, OANDA, Wise or any legit source)
I’m sure you can force the exchange rate to match the contracted exchange rate when making loan principal and interest payment, this enables Manager to calculate a gain or lose on the repayment (actual interest exchange rate vs contracted exchange rate). I will demonstrate that later.
@Abeiku I am a bit surprised about your reply. We know that so called parallel or black markets distort anything, especially when the discrepancy between official and such rates is huge. I am not advocating that Manager should enable anything illegal but I think that users would benefit from allowing multiple rates. For example in Nigeria there are at least 3 formal rates based on what you do and then there is also the parallel market rate for any than need FOREX. I am sure Ghana is not much different.
So the question is how within Manager to deal with this. We have not yet found the answer but may there is none.
This is a very normal practice. Businesses agree exchange rate in advance all the time.
The agreement is that, the lender is willing to accept 61.96RUB for every dollar in loan repayments regardless of what the actual exchange rate at the bank.
If the exchange rate is 65. RUB the business makes a gain because they will ask their bank to transfer only 61.96 RUB in settlement for every dollar.
You can enter 65 RUB as exchange rate but use 61.96 RUB in the settlement. The difference is a gain. I will post how to do that soon.
The loan was received in Bank A (RUB acc) and repaid from Bank B (USD acc). The currency of the liability account is the same as the base currency (USD).
My payment window does not look like the one you posted and there’s no option for indicating both base currency and loan currency. Maybe I didn’t set up the liability account right even though I was following the guide. Please let me know how to achieve the same functionality for my payments.
Another issue I’m facing right now is a revaluation of the loan amount for the end-of-the-year report. I believe there has to be a feature that recalculates the amount of the loan according to the exchange rate on December 31st, 2022 (OANDA) but I was not able to find it, Manager keeps giving the amount at the exchange rate on the day of transaction in the Balance Sheet. Thank you.
Go to settings and Set up Base currency - RUB, and Foreign Currency - USD
Go to Settings-> Control Accounts-> Bank and Cash accounts and create new control account for the USD loan account and put it in the Liabilities group.
Go to Bank and Cash accounts tab and create new Bank account for the USD loan account and select currency USD and also select the USD loan control account.
Set up your RUB Bank Account (if you have not already done so)
Use Inter Account Transfers to record drawdowns calculating the amounts manually using the set exchange rate 61.96 RUB/USD.
Record the loan payment using Inter Account transfer in the same manner using the set exchange rate.
Result should look like this.
I do not know your local laws, but I don’t think that you would need to record the liability at the current exchange rate at any point as the liability does not change due to the fixed rate.
Thank you for your response but I have attempted at solving the problem on my own and here’s what I did (pls feel free to correct my approach). Also, my base currency has always been USD and I cannot change it (having a few RUB transactions is just a temporary thing).
I have set up a new special account (Loan from XYZ) under control accounts (USD Loans Payable Acc in the Liabilities group) and allocated all the transactions there which allowed me to input the amounts in both currencies thus balancing the account correctly.
Please lmk whether this approach is different accounting-wise from the one you suggested (with bank and cash control acc) or also acceptable. Which one is better long-term?
Special accounts can be used for many purposes. If you have numerous loan accounts, rather than show them individually on a balance sheet, you can create all loans as special accounts within their own subsidiary ledgers, summarizing them in a single control account named Loans . This keeps your Balance Sheet concise enough to be easily analyzed, but lets you track what you owe on every loan.
