General currency conversion question and account type

1

Hello,

When I receive a payment in my multi currency paypal in USD I see this:
Paypal USD “general currency conversion” 140 USD

Now in my Paypal EURO I see:
Paypal USD “general currency conversion” 130 Euro

Both are the same.

What I did then is create a debit in the Paypal EURO of 130 Euro to my Main bank account in EURO by creating a transfer.

The problem is that both the Paypal USD and Paypal EURO show this single transaction as “suspense”. What kind of account can I put in in stead of “suspense”.

Thank you.

2

If PayPal are showing this USD 140 to Euro 130 automatically, then from an accounting perspective you should only be taking up the Euro 130 as the transaction, as its only a single but converted transaction.

If however, the USD 140 was an accumulation of transactions, which you then transfer in bulk via a separate transaction, then you would take them up separately.

As an aside, you can’t use the Bank Transfer feature under these circumstances, they need to be processed via separate Receive & Spend Money transactions.

NOTE: you would only use multi currencies if you are actually storing values within the currencies - but not if the currency is being past though without storage.

3

Thanks Brucanna, so I could simply leave the USD amount as “suspense” instead of deleting it each time and set the EURO transaction as the sale and put it in the right account.

Because each week I transfer a bulk of money from Paypal EURO to my main bank account, I think it will be ok to just right “transfer” for the lump sum as the sales will be calculated in the acccounts before the move.

Hope I understood you correctly.

Thank you.

4

If PayPal are doing the conversion automatically within the single transaction, then you should be TOTALLY ignoring the USD (+GBP) altogether as they aren’t relevant - only the Euro is applicable.

NOTE: you would only use multi currencies if you are actually storing values within the currencies - but not if the currency is only being past though without any storage.

5

Thanks, I wish I could get all the USD and GBP to convert to Euro automatically but unfortunately, Paypal keeps them in these currencies. No problem, I won’t use the import feature, it is too confusing from Paypal, I will have to redo all the transactions manually, I cannot see this to work any differently.

6

Sorry, I must be completely misunderstanding you. You started this topic off with:

a) PayPal USD “general currency conversion” 140 USD, &
b) PayPal USD “general currency conversion” 130 Euro

Which gives the overall impression that PayPal is doing automatic conversion, not storing in the currencies.
But now you have stated:

c) I wish I could get all the USD and GBP to convert to Euro automatically but unfortunately, PayPal keeps them in these currencies.

These statements don’t marry up.
Do PayPal or do you do the converting from USD / GPB to Euro. This clear picture is key to any suggestions.

7

I am reluctant to join this discussion, but want to point out that it is never acceptable to leave something in Suspense. See this Guide: https://www.manager.io/guides/best-practices/suspense-account.

8

No what is happening is this:

Let’s say I receive 140 USD as a sale. Paypal will keep this 140 USD in the Paypal USD account and won’t touch it until I send it back to my bank account(in euro).

So each month I keep all my earnings in the GBP and USD accounts and only transfer them to my EURO(local) bank account when it is the right time based on the currency status, this is why they created paypal this way, to give you more freedom of movement and not change your currency on the day of the sale).

Now the statement from Paypal is awful because it shows:

140 USD when not yet transferred.
140 USD conversion to EURO when I withdraw the money to my local bank account(and not my euro paypal account).

So the confusion arise when I have this situation:
Sale number 1 200 USD
Sale number 2 300 USD
Sale number 3 500 USD

The USD account shows as “1000 USD”
The Paypal Euro account shows as “0 EURO”.(You expected to see this EURO account as 945 Euro but…no unfortunately).

Now I do a transfer from my Paypal USD to my EURO Bank account(and not Paypal Euro account), things now show as:

PAYPAL USD NOW shows this on the statement:
Sale 200 USD
Sale 300 USD
Sale 500 USD
Conversion 1000USD

On the Paypal EURO statement it shows:
Conversion 945 EURO(Nothing telling you that the 1000USD matches the 945 EURO)
So things start to become ridiculous when you have multiple transfers of the same value.

My problem is this:
I can set the 3 USD sales in the account of “SALES”, no problem. But when I do this, I also need to get my gain or loss from the conversion of 1000USD to 945 EURO. Manager on the statement shows the Conversion 1000USD as “suspense” and the Conversion 945 EURO in the Paypal EURO account as “suspense” too.

With Xero I used to do this:
Set all 3 USD sales as “Sales” and leave them there.
Create a new manual entry of a transfer of Paypal 1000 USD to 945 EURO to my Local Bank account, then Xero was calculating automatically my gain or loss based on the sent amount and the amount that landed in my bank on that particular day, this is what I am trying to achieve with Manager but I just cannot work it out.

I am looking for a Panel quiet identical to Xero like below(imagine input fields):

Transfer account name 1(Paypal USD)
Value 1 → 1000USD
Date 1 = 12/01/2016

Transfer account name 2(Local bank account EURO).
Value → 945 EURO
Date 2 = 14/01/2016

Conversion loss/gain = 4 Euro
Rate = 0.94522

So visually you could see what was going on live on the screen.

The final word is that importing all the currencies automatically via statements will not work well in manager and become super confusing because Manager is not tracking the USD Paypal and follow the conversion to the EURO Paypal as the same transaction and therefore does not apply the loss or gain automatically like Xero Does.

I hope you understand the issue. I am lost with the current Manager workflow compared to Xero which pulls all the transactions alone each day and auto convert them + with its AI it used to automatically set the right account name based on what it remembered from your old transactions, really minimizing the clicks.

If manager could simplify this whole process it would be fantastic, but I also understand the complexity of it too.

I hope I explained everything better this time.

Thanks

9

Because the PayPal statement reference to PayPal Euro conversion/status is totally irrelevant, its just clutter.
The actual transaction is a transfer between PayPal USD and Bank Euro, PayPal Euro has no participation.

In fact, if you review your Xero transfer example provided above there is absolutely no reference to PayPal Euro in it, so why introduce it when doing the exact same transaction processing within Manager.

Secondly,

You can but you aren’t getting the transfer process right because you are to focussed on the Xero concept.
In fact you have two options, one with manual adjustment, the other with automatic adjustment.

Staying with your current setup - PayPal Cash Accounts - this uses the manual adjustment method.
The following worked model has these parameters:

  1. USD sales of 1000
  2. USD to Euro exchange rate being 1.10
  3. The USD 1000 transferred becomes Euro 900

A) The PayPal USD cash account has the following Receive Money for 1000 USD sales

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B) At the 1.10 exchange rate this ends up in the Balance Sheet as

C) Now the PayPal USD 1000 is transferred to Bank Euro, first with a PayPal USD Spend Money. Note the Account being used is called “PayPal Clearing”

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D) This reduces the PayPal USD cash account to zero and the Balance Sheet looking like

E) Now the Main Euro cash account gets a Receive Money of 900 and uses the same PayPal Clearing account

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F) This leaves the PayPal Clearing account with an exchange rate variation balance which would be transferred to the P&L via a Journal.

10

So what is left in the clearing account will the gain/loss of the currency, I will set it as an “expense” in the profit and loss statement but shall I not move it to the “Foreign exchange gains (losses)” afterward and zero this account each time?

Yes Paypal statements are cluttered with a lot of unecessary data, nightmare.

Thank you.

11

The “Foreign Exchange gains (losses)” is a control account - so you can’t post directly to it. Just leave any balance in the “expense” account and if it happens to have a favourable balance, you have the option of reallocating it to be an income account.

12

Thanks Brucanna, I got it now. I will use this flow to input everything, just deleted all my previous transactions, let’s start from fresh again…

13

@Brucanna
Sorry to reopen this thread, but I have a question:
Is the PayPal clearing amount equal to the the amount to be show on Foreign exchange gains (losses) ?

14

Yes, but the PayPal Clearing amount in the above worked model is using the manual adjustment method, my recommendation would be to use the automatic method so that the Foreign Exchange Gain (Loss) ends up in that control account without the need for the clearing account.

The manual adjustment method above uses a Spend Money from the PayPal USD cash account and a Receive Money into the Main Euro cash account with the Clearing Account being used as the payment / receipt contra account.

The automatic method would replace both of the Spend / Receive Money transactions with a single Transfer Money transaction, this way any variation would be posted directly to the Foreign Exchange Gain (Loss) account without the requirement of the additional clearing account.

Summary tab

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