do you have a line of credit or a credit card
in a foreign currency well then you should learn how to record transactions in foreign credit card
accounts
if you have any questions about this topic you can leave them in the comments section below and i'll
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just like home currency credit card accounts foreign credit card accounts are exactly the same
when you record transactions in quickbooks except you will have a realized gain or loss
for the difference in currency value between the date of the charges and the date of the payments
you therefore must make a home currency adjustment right before each credit card payment or credit
card credit for example let's imagine on february 20 we opened a credit account with bank of guyana
with a credit limit of a hundred fifty thousand guyanese dollars
well then we would have to add that account to our chart of accounts
click accounting chart of accounts and then you would click new now the type of account is credit
card and there is only one detail type and the name of it will be credit card bank of guyana
and as soon as you save it you must remember to make the currency of that credit card the
guyana dollar notice the active currencies are up top here and easy to find click guyana dollar and
then click save and close exchange rate is not necessary you're only creating the account now
let's imagine on february 21 we charge gina casino for delivery 9800 guyana dollars
well at the moment you charge the guyana dollar was worth only .008 of the dollar back on february
21 of 2021 so what will be the result well the delivery expense excuse me guyana credit card
now the interesting stuff happens when we actually go to pay the balance of the credit card
on february 22nd we pay all of the 9800 guyana dollars to remove the balance of what was owed
to the bank of guyana credit card on february 22nd the guyana dollar was .007 of the u.s dollar you
must make a home currency adjustment or revalue the currency from the currency list as it were
before you pay your account balances or the balances will be out of sync in the way that we
described in the prior videos so you must adjust two accounts and you may well ask why do we have
to adjust two accounts well that's because our guyana bank account is holding 9800 dollars
in guyana dollars that were previously worth .009 at the moment that we either adjusted or had our
last transaction and that's why the us dollar balance shows eighty eight dollars and twenty
cents but you see on the day that we're paying the credit card those same 9800 guyana dollars
are only worth point zero zero seven so our bank account is only worth sixty eight dollars and
sixty cents what that means is we actually lost 19.60 from our bank account of guyana
at the moment we pay because the exchange rate was lower from the day that we actually adjusted or
acquired the guyana dollars but you see we also have guyana dollars in the credit card balance
listed in our quickbooks records and on the day we charged those guyana dollars the dollar was
worth point zero zero eight and that means those very same nine thousand eight hundred dollars
that are in the credit card records were only recorded at point zero zero eight and the the
guyana dollars in the credit card were valued at seventy eight dollars and forty cents
when we charged now on the day that we pay they're only worth point zero zero seven
so that means that same nine thousand eight hundred that we owe in guyana dollars is now
only worth sixty eight dollars and sixty cents and guess what you actually gained nine dollars and
eighty cents between the date that you charged and the date that you're going to pay now you may well
ask why is this a gain if the amount decreased well it's very simple you originally owed seventy
eight dollars and forty cents in us dollars on the day that you charged but on the day that you pay
you don't owe 78 u.s dollars on the date that you pay you only owe 68 u.s dollars because of
the decrease in the exchange rate so that's why in the case of the credit card you gained 9.80
even though your bank account lost 19.60 so what was the net loss well if you lost
and sixty cents on one account but you gained nine dollars and eighty cents in the other account then
the net loss which will be the net adjustment home currency adjustment on march 31st before we record
paying will be nine dollars and 80 cents and after we pay both accounts should be equal because they
will have the same number of units and each of those units will be valued in the same amount
to revalue the currency we click the cog wheel and we click currency we go to the row of guyana
dollar and we click revalue currency now the date is very important it must be the
date that you're evaluating and you're going to put in the custom rate because this is only for
illustration purposes push tab now you notice both of the gains and losses are listed here
for the credit card to revalue everything to .007 would mean a 9.80 gain because we owe 9.80
less because the value of the guyana dollar decreased after the charge but on the other hand
the value of the dollars in our guyana bank account that we are holding has decreased by 19.60
so the net gainer loss is exactly what we mentioned a moment ago
we click revalue and save and you can see from your trial balance that the exchange gain or
loss has been updated before the payment and the balance of the guyana bank account
is now equal to the balance of the guyana credit card so what does that mean
it means we owe 9800 guyana dollars and we pay 9800 guyana dollars and the balance of both
guyanese dollar accounts bank and credit card alike should be zero so we click new now to
pay the credit card you can click expense check or credit card credit i'll just click expense
and if you click expense the way to do it here is the money is coming from the bank of guyana
bank account and it's going to the bank of guyana credit card account which is down here boom money
is coming from the guyana bank account to the guyana credit card account you must be careful
to put the exchange rate that you had adjusted it to and make sure you put the correct payment date
and the amount of guyana dollars wipes out both balances save and close and the balance of the
guyana dollar bank account and guyana dollar credit card account both finish with zero
you