Making Payment In a Different Currency

This support notes are suitable for:

• ABSS Premier

Introduction

Many business trade in various currencies. Some purchase or sell goods in one currency and receive payments or make payments for the goods in another currency. A common occurrence in today’s business world is a purchase of goods from a supplier in one currency and the payment of the bill in another currency.

This support note explain how you can easily deal in with such as scenario the multicurrency feature of your MYOB program.

In the following example we will make a purchase from Nash & Sons Pte Ltd for 1000 cargo containers at a purchase price of EURO €16000 and pay the supplier in USD.

These transactions will be dealt with by using a contra account which will act as a link between both currencies.

How do I set up my data file to record multicurrency contra Deals?

Setting up your MYOB data file to record contra deals is easy. Apart from activating the multicurrency feature in the Preferences found under Setup, a contra account has to be created.

Setup a Contra Clearing Account

The Contra Clearing Account is setup as a bank account and is used to pay bills and Invoices of the other business in the local currency which is the Australian Dollars.

1. Go the Accounts command center and click Account List.
2. Select the Asset tab and click New.
3. Make sure you select Bank in the Account Type drop-down menu.
4. Give the account a unique number that suits your account list.
5. Name the account Contra Clearing Account.
6. Click OK.

How are the multiple currency purchases recorded and paid?

Step 1 — Recording the Purchase

Record the purchase as normal using the Enter Purchases. Enter these transactions as they would normally be entered using the Multi Cunency.

Referring back to Nash & Sons Pte Ltd, the purchases entered in our MYOB data file are:

• A purchase for Euro €16000

For this example we will consider present exchange rates of

AUD $1 = EURO €0.61 or EURO €1 = AUD $1.6333333

AUD $1 = USD $0.75 or USD $1 = AUD $1.333333

Step 2 - Recording The Payments

Receive Payment

The payment for the purchases for €16000 is to be made in an equivalent USD amount.

• Open Pay Bills
• Click the Pay from Account option then select the Contra Clearing Account in the adjacent Account Field.
• Select the Supplier then enter the Amount Paid
• Enter the Memo and the Date of the purchase
• Place your cursor in the amount paid field and if necessary enter the amount
• Click Record.

The window below shows the Pay Bills transaction. This will result in a deposit of AUD $26133.33 into the Contra Clearing Account. This can be quickly checked by viewing the Contra Account Balance in the Accounts List window.

The amount deposited into the Contra Account will be the equivalent of EURO €16000 (at the current exchange rate - EUR € 1 = AUD $ 1.633333). MYOB will automatically convert the EUR amount into AUD and transfer it into your Contra Clearing Account taking into consideration the Transaction Exchange Rate.

A funds transfer now has to be done from your USD Bank Account to the Contra Clearing Account, so that the purchase for EURO €16000 can be paid off.

For this we are going to proceed with a Spend money transaction from the USD Bank Account to the Contra Clearing Account, as shown on the next figure.

Please note that the equivalent of AUD $26133.33 is USD $19600 at the exchange rate of AUD $1 = USD $1.333333

This calculation is done in the below mentioned way:

USD $1 = AUD $1.333333

USD $19600 = AUD $?

USD $19600 X 1.333333 = AUD $26133.33

This will result in a deposit of $26133.33 into the Contra Clearing Account and a withdrawal of $19600 in the USD Bank Account and the remainder in the USD Exchange Account. This can be quickly checked by viewing the Accounts List window.

If you have a few cents balances in the Contra Clearing Account a General Journal entry can be done, allocated to the Currency Gain/Loss Account as this difference can be caused due to rounding in different exchange rates.