do you pay a fee to convert currency that you receive from your customers
before you can transfer it into your account
well this video will show you how to record fees for exchanges and deposits into quickbooks desktop
if you have any questions about this topic you can leave them in the comments section below and
i'll do my best to help you and of course if you feel the video helped you i hope you will click
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in this second example the payment we receive from yuri will be directly deposited into the
bank account however if you need to deduct an exchange fee you need to make an intermediate step
you need to record the full payment in the undeposited funds account then with the same
date record the payment as deposited in the deposit window that will give you the chance
to deduct the fee for example let's imagine on january 25th we did legal service for yuri bury
and we built him for 10 000 rubles each ruble was point zero one three dollars
on this day january twenty fifth on january thirtieth he pays all
ten thousand rubles the ruble is only worth point zero one two of the dollar on that day
the loss is ten dollars on the exchange just like we learned how to calculate in a prior video
and to add insult to injury they also deducted a twenty dollar fee for the currency exchange
and the transfer of funds so how do you handle this well you would record the payment the same
way that we learned in the prior video except this time you would not choose bank account
you would instead choose undeposited funds then immediately after recording the payment
you would open the deposit window and deduct the fee and record the net amount into your account
so first we record these two transactions january 25th we did uh legal service 10 000 rubles 0.013
for yuri from the top left we click new invoice the date is january 25th
the customer is yuri and the product and service is legal fees earned the amount
10 000 rubles now the rate is very important the rate is an even point zero one
three at the moment we record this invoice now we do not want to change it back on the currency list
we want to change it only in this transaction so we click ok and then we click save and close
and as you can see accounts receivable rubles shows up for the first time as a hundred and
thirty dollars and income from legal services becomes exactly the number we expected and now
let's record the payment on january 30 the ruble was only worth 0.1012 of the dollar when we got
paid all 10 000 rubles so the loss on the exchange is uh ten dollars because we calculated just like
we learned in the prior video so what will be the result after step one just recording the payments
into undeposited funds well if they paid all 10 000 rubles then accounts receivable rubles will
go down to zero and because they were worth 120 u.s dollars at the moment we received them then
undeposited funds will increase by a hundred and twenty dollars and become two thousand one hundred
twenty and the difference is a ten dollar loss now right now we have a six dollars and thirty cents
gain but if we put in a ten dollar loss against a six dollars and thirty cents gain we wind up with
a net loss of and seventy cents and these will be the numbers just after recording the first step
of receiving the payment from the top left we click new receive payment the date we received
the payment was january 30. we received from yuri and you can see he has his open invoice here
and the rate on the day we received the payment was point zero one two
now click ok and scroll down now of course we are not going to use this even though the money
has been directly deposited to chase bank we have to do the intermediate step of recording it into
undeposited funds and that's because we will have to do a second step to subtract out the
fee so we acknowledge that we have received all of the 10 000 uh russian rubles but we
received it in terms of us dollars and because the day that we received it it was at this rate
we are going to record in our quickbooks records a change of one hundred twenty dollars to the
accounts that we discussed a moment ago and that's how you record it we then click save and close and
you can see the results after step one are exactly as what we expected chase bank has increased to
two thousand five hundred forty oops excuse me and accounts receivable in rubles went down to zero
and you'll notice exchange gain or loss has moved from the six dollars on the credit side to three
dollars and seventy cents on the debit side and now that we've recorded that the very last step
is to deduct out the fee and acknowledge that it actually went into the bank account now we're
recording this deposit on the same date as the receive payment so the exchange rate will be the
same the financial institution deducted 10 000 rubles for the exchange to convert the currency
to dollars and then transfer it into our chase bank account and the expense that they deducted
that we look that we record for the ten thousand rubles is an expense called extra exchange and
transfer fees expense and if you don't have it in your chart of accounts you should pause the video
and put it in your chart of accounts so what will be the results after this next step well
the hundred twenty dollars will no longer be in undeposited funds they will be moved to the bank
account so under positive funds goes down to two thousand and the bank account goes up to 2 648
and of course the fee shows up as transfer fees expense in the u.s dollar equivalent of
the thousand rubles that they deducted and at this moment that equivalent is twelve dollars and this
will be the result after the last step that we finish recording the deposit and deduct the fee
we click new bank deposit and we first change united states dollars
to russian rules that gives us the ability to see all of the undeposited funds that are in rubles
now we have to make sure that both the date and the rate are exactly what they were a moment ago
one point excuse me zero 0.012 of the us dollar on the day we receive the money january 30th
now we click the check mark in the left to acknowledge that this is what we are
physically depositing into our chase bank and of course it's going to be converted
into the uh us dollar equivalent before it's deposited so quickbooks knows that you're
increasing your bank account by a hundred and twenty u s dollars because of the number of units
and the rate now you have to subtract out the fee and the way to do that is to scroll down and under
the word account click for the pull down arrow and if you did not yet put the expense transfer fees
expense or you could even call it conversion fees expense but you do have the ability to add that
at the moment you add a transaction so this is out type of course is expense
and in this case detail type doesn't matter you can put other business expense if you want
but the name should be either transfer fees expense or conversion fees expense or any
expense you had to pay to be able to get the money into your bank account in terms of u s dollars
click save and close and then it will be on the list here and the amount should be in terms
of rubles because you physically deposited rubles and what they deducted as a fee was in terms of
rubles minus 1000 and then of course you have to push tab you put it as a negative number
so it lowers the overall deposit so you're depositing 9000 rubles but it won't matter
because it will be in your u s bank account as an increase of a hundred and eight dollars
so we double check everything we click save and close and when we go back to the trial balance
the numbers are exactly as what we expected the undeposited funds is now down to 2000 even
chase bank account went up to thousand six hundred forty eight dollars exactly as what we expected
and the amount we paid in terms of us dollars for the transfer or the exchange fee is 12 us dollars