are you required to bill your clients in their currency not yours well in quickbooks desktop
you have the ability to send invoices and receive payments in multi-currency
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sometimes we have customers that require that we build them in their own currency
for some product or service that we provide we can invoice or bill the client in any currency that we
have activated and assigned to that customer they can pay from pay platforms like paypal that can
convert their currency to dollars so there are really two kinds of multi-currency transactions
they're the kinds of transactions that are converted to or from the home currency
at the moment of the transaction and then there's the kind of transaction where we physically pay
or receive the other currency now this video and the video that follows will focus on this kind
the type of transaction that gets converted before we pay it or before we receive it and
in this example there is no fee to transfer the currencies or to exchange the currencies before
we receive payment we will see how to handle the fee in the next video following this one
if it is your first time billing in another currency quickbooks online already remembers
what the current exchange rate is because it updates the exchange rate every time you log in
you can check this from the currency list for all active currencies
so if we went here and clicked the cog wheel and came over to list currencies
you can see that we can look at the russian ruble and we can click right here and we can see what
the currently downloaded exchange rate was at the moment that we logged into quickbooks online
today and then it's telling us the rate because this is the day that i'm recording this video
so as of this day this is the exchange rate between the dollar and the ruble and of course you
can change it if you want to in here but you don't have to because you can anyway change it at the
moment that you record a transaction and now let's do our example let's imagine on january 11 of 2021
we did legal services for yuri buri and we must bill him in rubles he agreed to pay
ten thousand rubles in the future for the service that we gave him today
first we download the exchange rates for the very first time then we will send him an invoice for 10
000 rubles not dollars quickbooks will create a new account receivable type of account
just to show the dollar equivalent of how much we are owed in rubles at the moment of the first
transaction that we have with rubles so how much will that be in us dollars well we just downloaded
the exchange rates and we saw that on the list one dollar equals .01337 rubles ten thousand rubles
times point zero one three three seven means the dollar equivalent of the service that we are
billing him for is a hundred thirty three dollars and seventy cents so what will be the result well
we just earned 133.70 more worth of income from legal fees so income from legal fees will increase
to twenty seven thousand one hundred thirty three dollars and seventy cents and of course
because this is our first transaction with rubles and we are owed a foreign currency
quickbooks automatically creates a new account receivable account just to show how much is owed
in rubles and the dollar amount that is owed to us in rubles is a hundred thirty three dollars and
seventy cents and that's what the trial balance will look like after we record this first invoice
from the top left we click new invoice the date is january 11th of 2021 and the customer is the
one that accepts russian rubles yuri buri now it's not exactly at the rate that we said a moment ago
but i'm just going to show you that you can change it at the moment that you record the transaction
and it actually asks you if you want to change it for all future transactions i'm just going
to leave it for this transaction only but it doesn't matter because each transaction
gives you the ability to change it clicking here would go back and change it on the list
so that the list would remember that this is the exchange rate you want to use but you don't
have to you can do it transaction by transaction because it changes every day and we are charging
uh for legal fees earned 10 000 rubles and that's what we're charging and then this person will owe
us 10 000 rubles at this exchange rate and that's the exchange rate that we predicted a moment ago
so at the moment we click save and close we can then click reports custom reports
trial balance and you can see that the results are exactly as what we expected
the income from legal services increased by 133.70 and for the very first time accounts receivable in
rubles showed up for the first time in the us dollar equivalent of 133 dollars and 70 cents
so what happens on the day that we get paid for the invoice well the day we get paid the
rubles are worth a different amount from the rubles on the day that we created the invoice
we can either download the new exchange rate for the day we got paid or we can input the exchange
rate that we need it to be into the quickbooks record at the moment we record receiving the money
then quickbooks will record the transaction normally but add an adjusting journal entry
for the difference in rate from the invoice date to the payment date for example let's imagine on
january 15th we received full payment from yuri for the invoice from january 11th if we
received full payment that means he paid us all of the 10 000 rubles that were on the invoice
the rubles were worth 0.01337 on the day we made the invoice however today january 15th
those same rubles are now worth 0.014 dollars so what's the gain well the dollar was
0.01337 rubles on the day we made the invoice now the day we get paid the dollar is 0.014
rubles the increase per ruble is point zero zero zero six three dollars and that gain goes for
every single one of the ten thousand rubles so if you multiply the gain times ten thousand that
means the gain from exchange is six dollars and thirty cents it's very easy to multiply times ten
thousand just move the decimal point over and you see if the gain was point zero zero zero six three
for each one times ten thousand that's six dollars and thirty cents another way of looking at it
is that the day we made the invoice the rubles were worth 133.70
and then we held on to that invoice and then the day we got paid that day the rubles those
same ten thousand rubles were then worth a hundred and forty dollars so you just
gained six dollars and thirty cents just by waiting to get paid and you may well ask
what will be the result in the trial balance when we get paid from yuri well
we no longer have accounts receivable in rubles because in this example yuri is paying all of
the 10 000 rubles that he owes us so the ruski account receivable for rubles goes down to zero
but the amount that's physically paid into the bank account is a hundred and forty dollars
the amount that it's worth at the moment we got paid so our bank account increases
by a hundred and forty dollars and becomes two thousand five hundred and forty dollars
and the difference shows up at the bottom of the trial balance on the credit side the gain
on the currency exchange will be six dollars and 30 cents from the top left we click new
receive payment the date was january 15th the customer was the customer we have with rubles
yuri now we're physically depositing this money to the chase bank account under the assumption
that the rubles will be immediately converted and deposited into our bank account
but the most important thing to take note of is this rate on the day that we physically got
paid the rate was .014 of the us dollar and we're only changing it for this transaction
now everything else will be in terms of rubles we received 10 000 rubles
and of course since they were converted into us dollars that means our accounts in our quickbooks
will change by the us dollar equivalent a hundred and forty dollars and all ten thousand rubles
will apply to the invoice for ten thousand rubles so yuri's balance will be zero we click save and
close and when we go back to the trial balance you can see that the bank account balance is exactly
what we predicted 2540 because it increased by 140 us dollars that's what we got paid in after
it was converted on the day that he paid us and now that we don't have any rubles in our account
we owe owed to us we now have accounts receivable for rubles equaling zero and the most important
thing to look at is down here the exchange gain or loss for the very first time we gained
a certain amount of money because there was a difference between the value of the currency
for the first transaction the invoice compared to the second transaction when we received payment
for that invoice and if you look at the profit and loss you will see
that you have net operating income which is your normal operating income and then the exchange gain
or loss shows up below net operating income but it still has an effect on your overall net income
you