Multi-currency and automatic credit allocations

I really like the automated balancing of exchange rate differences by posting to the Supplier credits Account. I guess that this is really an automation of the work-around that used to be necessary. I also see that we can access the Supplier credits account by means of a Journal Entry. So I guess we can go back and adjust our previous payments where we used the custom exchange rate as the balancing mechanism.

But, where does this leave the Currency gains (losses) account. I can not see a corelation between it and the Supplier credits account.

Could you please explain how the process of making foreign currency payments is supposed to work?

If Supplier credits account holds any balance, it means you have a credit with one or more of your suppliers. If at least one of those suppliers are maintained in foreign currency then credit from this supplier gets the same treatment as if you would have money in foreign currency bank account.

Fluctuations in foreign exchange rate would affect Currency gains (losses) account.

Not sure, the process is always the same - nothing has changed. If you make payment to supplier, then allocate the payment to Supplier credits or Accounts payable account.

I guess you need to be more specific on what you are trying to record.

Oops! What we have is a misunderstanding on my part.

I now realize that I still need to enter the custom exchange rate for each transaction to clear the over/underpayment, wherever it is to be posted.

I had an interesting case where an old invoice was paid and the amount posted to Supplier credits was carried forwards through several invoice and payment cycles for that supplier. I tried entering a custom exchange rate for the initial payment where the issue started, but I was unable to do so.

Could this have been because the supplier invoices in our base currency but on this occasion, we paid them from our Euro bank account?

I have posted the outstanding amount to our FOREX Balance account by means of a Journal entry, in the same manner as we used to correct over/underpayments before custom exchange rates were introduced. This has cleared the outstanding amount.

Upgrade to the latest version (14.12.24)

It’s now possible to set custom exchange rate on transactions posted against Supplier credits account even if supplier is in base currency and payment is from foreign currency bank account.

To set custom exchange rate for the transaction posted against Supplier credits account, go to Suppliers tab, click on the amount or “dash” under Supplier credits column. This will give you list of transactions posted against Supplier credits account for that particular supplier. In this list, find the transaction that represents payment from EUR bank account and click on exchange rate to modify it so the converted amount represents how much exactly your supplier has received in their currency.

The difference will be posted to currency gains (losses) account as usual to ensure the books are always balanced.

Thanks Lubos - I have now come to the end of another accounting period and it all works as specified. I keep finding new solutions as I spend more time working with the the system. I had not realised how powerful the Suppliers listing was.