Putting the same rate for both will work technically - unless you have two invoices raised on the same date and paid on different dates with different rates
What you are proposing is false accounting and could get you into trouble with the authorities in your country
Joe, Pl understand, in India, my all profit/loss, taxes will be calculated with respect to amount credited in my bank. Manager softwareâs Foreign Exchange Revaluations is not useful for me at all. Adding exchange rate is not solving my problem. I donât know if I can rollback my data. Itâs the only option I left for me. I love manager software & using it since 2016 but this problem is made me really unhappy. Thanks for your help.
Well, you had better talk to your accountant
@SuyogKulkarni here is my view on this. Basically whatever is posted to Foreign exchange gains (losses) account is correct. In double-entry accounting, you canât simply dismiss amounts. You can only move them elsewhere.
Multi-currency accounting can get complex real quick. To the point when the forex gains (losses) seem high but you have no easy way to find out whether itâs due to bookkeeping error or some other factors without carefully analyzing each transaction and nobody has time for that.
I think drilling into forex gains losses need some improvements to make it easier to see whatâs going on. The issue is that if you make a bookkeeping error (e.g. receiving $1000 into USD bank account but matching only 100 EUR to invoice) then the difference will be posted as your forex gain and you might not even notice until your customer complains when you send them the next statement or you do bank reconciliation.
If you are entering your exchange rates correctly (and letâs assume you do), then Manager knows that
1,000 USD = 935 EUR
So if you enter transaction where you claim
1,000 USD = 100 EUR
then the difference will be posted as your forex gain account but Manager could tell you that you are about 90% off the known exchange rate. Normally you shouldnât be more than 3% off due to spot exchange rates (bid-ask spread) being less favorable to you than real exchange rate. So when you see transaction where the percentage is too high, it would almost certainly indicate bookkeeping error. And I think all that is needed is to easily see these bookkeeping errors because right now they are not easy to spot.
I have some idea how to improve drilling down into forex gains (losses) account so letâs see how it turns out.
@lubos
Thank you for your feedback.
Let me clarify, Iâve entered all âexchange ratesâ correctly.
Mostly I will get paid after 1 to 2 months. Foreign currency get processed & get paid in base currency. I add the receipts for received payment for respective invoice & add exchange rate for same date. With this practice my ârounding expensesâ are just 0.40 which are totally depends on exchange rate only.
See snaps for more clarification.
Manager is comparing âconversion rateâ while invoicing & conversion/exchange rate of payment date. I think this is wrong OR you simply add option to enable/disable the âForeign exchange Revaluationâ.
My point is until I get paid, there wonât be any gain or loss. Iâm using Manager software since 2016 & followed same practice & never faced any issues but now fearful about future release due to this âForeign exchange revaluationâ.
Please do the needful.
Thank you.
On accrual-basis there would be unrealized gain or loss. Is your argument there shouldnât be even unrealized gain/loss on accrual-basis?
Yes, he is working on the basis that he revises the base currency amount of his sales invoice to equal the base currency amount he received when the payment is made weeks or months later.
This is in direct contravention of all accounting principles everywhere unless he switches to a cash basi for his accounts for all sales and purchases - this may be allowable in his jurisdiction
Another solution would be to invoice in INR - and leave the exchange rate gains and losses to the customers
The best solution is to understand what invoicing in foreign currencies entails and accepting the fact that forex revaluation gains and losses are part of the bargain
Hi Lubos,
Iâm not following accrual-basis.
Hello @lubos & @Joe91 ,
Just FYI, Iâve checked all invoices & receipts & found all values are correct. Ex. If invoice is of $1000 then received amount in base currency is added properly & $1000 is also entered correctly so that invoice can be shown as a fully paid. Exchange rates are also added properly for all payment dates.
Per version 20.10.89 rounding expenses are 0.40 but with newer version it shows 10,00,000+ under foreign exchange revaluation. Iâm working in service industry so my oversees customers will never consider foreign exchange gain/loss. He can simply reply that I have paid $1000 against invoice of $1000.
Please help me & guide me how can I adjust the entries now.
Thank you in advance.
The difference in INR between the INR value calculated on the invoice using the foreign currency (USD in your case) and the exchange rate on the date of the Sales Invoice and the INR value entered when you receive the payment from the customer will always be posted to the Foreign Exchange Gain/Loss account. This is just the way that double-entry accounting keeps the books balanced.
There is nothing wrong with this and so there is no need to adjust the entries at all.
I suggest, again, that you talk to your accoutant about this
Ok Thanks
@SuyogKulkarni if you check the latest version, drilling-down into forex revaluation has been greatly improved. I think itâs a lot easier now to see where the amounts are coming from. Can you check?
I failed to see any change, can you throw more light on the improvements made?