For banking expenses, we receive a report listing all the expenses with the tax code required by local authorities, the expenses could be in local or foreign currency but the report is always presented in local currency. Suppose I have an account in USD and register a banking expense, I need to be able to set the exchange rate for that transaction so local value matches with the report that is sent later to authorities. I could use similar functionality that exist in journal entries but journal cant post transactions to bank accounts.
English is not my main language so I hope it made sense. If you guys have any idea of a different approach, please let me know.
You cannot do what you are asking. If your bank account is set up in USD, all receipts and payments into or out of that account must be in USD. The fact that your bank offers a report converting transactions to the local currency is irrelevant. That is their report, not Manager’s. And exchange rate changes do not alter the balance of a USD bank account as reported by the bank holding the account.
You can, however, enter exchange rates daily in the Settings tab. But that only governs the conversion of balance sheet accounts to your base currency. It does not adjust foreign currency transaction amounts.
What I’m referring to is not about the account balance nor transaction amounts, with both should always be in the same currency as account is set up like you mentioned. I’m referring to the value in local currency that we asume as expense for taxing purposes. We can enter exchange rates daily in the Settings tab but can also have more than one exchange rate for different transactions on the same date. Let me try with an example:
Say bank A charges a fee of 3 USD on 31-May-2022 and bank B charges a fee of 2.5 USD on the same day. Each bank uses the exchange rate they are offering to customers, so bank A uses 1 USD = 45 LC (local currency) and bank B uses 1 USD = 50 LC. For the purpose of this example, lets say the exchange rate you have to use is none of the above but 1 USD = 47.25 LC as end of day exchange rate. In both banks the charge is in USD and the final balance would be previous balance minus the charge, but in Manager, the expenses for those charges would be 3 USD * 47.25 = 141.75 LC (bank A) and 2.5 USD * 47.25 = 118.13 LC (bank B). However, the report sent to tax authorities says 3 USD * 45 = 135 LC (bank A) and 2.5 USD * 50 = 125 LC (bank B).
Later on (monthly) we have to send our own expense report on local currency to tax authorities and the values should be the same as the bank report but, in this scenario, they won’t be. If we can assign the local value or the exchange rate as well as the original value in foreign currency at transaction level, this can be avoided and it wont matter the exchange used as end of day in Manager.
While what @Tut says is true, there’s no built-in way to set the exchange rate on a transaction level – in fact I wouldn’t recommend having this built it. But that doesn’t mean that the effect you describe can’t be achieved @Nero.
Two possible solutions come to my mind.
Option A. The easiest method is to create two separate USD currencies, one for bank A and one for bank B. This allows you to keep separate exchange rates per bank – problem solved no sweat.
Option B. is to create a a transitory Bank Account account where:
The first record (prep step) is to transfer the charge from the actual bank to the clearing account just to set the exchange rate – no expense involved, as follows:
Account
Debit
Credit
Transitory Bank
X LC
Real bank
Y USD
The second entry records the expense as a payment from the transitory account:
Account
Debit
Credit
Bank charges expense
X LC
Transitory bank
X LC
I would personally opt for Option A but it will not work if the bank exchange rates change midday; in that case you’re probably stuck with the more laborious Option B.
@Ealfardan, I don’t follow either option. How does Option A solve anything? As I understand you, the problem of spending in USD but the bank reporting in local currency is not addressed at all. And Option B records an expenditure in local currency that occurred in USD.
OK, based on this quote, I rephrase it and submit a request for development team to consider enabling for bank transactions the same functionality that already exists for journal entries.
Thanks for the workaround provided. I’m curious, why would you not recommend having this built it? How would it be different from what we can do with journal entries if you need to adjust any special account in foreign currency and post it in local currency in your account chart?
The problem is that the expense isn’t recorded at the bank’s specific exchange rate.
From post #1 I know that these banks are denominated in USD
which means that if you create a payment of bank charges from that account, it’s going to get automatically translated by Manager according to the exchange rates which leads to this:
The solution is to keep two sets of exchange rates and that requires two separate currencies.
In option B, you force conversion rate using inter-account transfers. Like so:
In cases where currency equivalence can be forced, such as journal entries and receipts against receivables, the purpose is to prevent future transaction imbalances when exchange rates change. Adjustments are made automatically to Foreign exchange gains (losses) instead. That is quite different from trying to record bank transactions in currencies in which they did not occur.
The requirements of your government aren’t in touch with the reality as no conversion of currency took place. As @Tut already pointed out here:
Manually setting each transaction’s rate is more work than Option A and just slightly less laborious than option B.
Judging by the number of requests for this feature, this looks like a niche request which could only be justified if it doesn’t affect the workflows of those who don’t need it. I imagine that introducing this feature creating additional steps and/or room for error for the rest of the users.
Like I said, this is not what we are trying to do but the required exchange rate record you mentioned before.
I actually disagree in this point since it requieres to post the transaction and then go to Settings to update the exchange rate (or viceversa) while the other approach allows you to include both values immediately (1 step) and let Manager adjust the exchange rate accordantly. Something like this:
Not normally. When I say more than 1 rate a day, I’m referring to each bank (obviously if the rate is different) and would depend on how many different banks you are using on your daily operations.
I don’t update exchange rates daily because I don’t see any value in that. I find batch creating exchange rates once at the end of each month more than sufficient and that’s why I said option A is less work.
And regarding this:
Although @Tut has explained this before, but it’s a very nuanced matter so I’ll reiterate it differently:
Journal Entries allow users to supply foreign currency for accounts denominated in foreign currency so that the journal entry has an effect on the foreign currency account. The foreign currency amount is a property of the Special Account in question.
Similarly, receipts allow users to enter the foreign currency amounts for foreign currency accounts.
Unlike points 1 & 2 where foreign currency accounts are realized in foreign currency, Manager doesn’t allow users to manually translate a pure unrealized foreign currency transaction into local currency.
What this allows is dynamic calculation of foreign currency, which ensures that two things happen:
The foreign currency transaction will immediately take effect at the most recent exchange rate without the user having to update the exchange rate at the time of transaction.
Once the exchange rate is known and updated, Manager will dynamically translate it using the rate supplied at that day.
This separation between entry and translation enables the users to record the transaction even when the exact rate is uncertain and be able to update the exchange rates in set intervals (i.e. weekly, monthly or quarterly) instead of manually tracking individual exchange rate for each and every transaction.
Which makes me curious whether a monthly or weekly exchange update would help your case, or not? @Nero
