do you receive products or services from overseas vendors whom you continuously
owe a balance to well then you should learn about how to use the multi-currency feature
when dealing with accounts payable
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the accounts payable feature in quickbooks is only necessary when you owe money directly to
the vendors who you who perform services for you usually you need to continuously owe them for
more than one month's worth of service or bills in order to benefit from using the enter bills
pay bills window in the accounts payable feature in quickbooks so why is this
an accounts payable issue well that's because on the day you receive the service from the vendor
the dollar amount of the currency you owe is based on the exchange rate on the day of service
or product delivery and that should be the date of the bill so let's imagine that you got a bill for
10 000 guyana dollars and on that day that bill and those 10 000 were worth 80 us dollars now
let's imagine on the day you go to pay the vendors bill the value of that same currency is different
because exchange rates change every day well in a case like that you would have a gain or loss on
the exchange at the moment you use the pay bills window to pay the bill to the international vendor
for example let's imagine on april 2nd you received delivery service from gina casino
and a bill for the service in the amount of ten thousand guyanese dollars and it was bill
number eight four seven two the guyana dollar was worth only 0.008 us dollars at the moment
we received the service and the bill so what will be the result well we know that accounts payable
guyana dollars will show up for the first time as eighty u s dollars because that's point
zero zero eight of ten thousand so the equivalent of u s dollars that you owe will be eighty dollars
for the service you received and because you owed eighty dollars that means you received a service
worth eighty dollars and because it was delivery service that you received delivery expense will
increase by eighty u s dollars and become seven hundred and thirty eight dollars and forty cents
let's record the bill we click vendor enter bill and the date of the bill was april 2nd
the vendor was gina casina quickbooks remembers she gives us delivery service and again the date
of the bill well the due date will leave alone but the amount of the bill is
10 000 guyana dollars and at the moment we received the bill the ten thousand guyana
dollars were in fact worth point zero zero eight u s dollars making it worth eighty dollars you
see right up here we click save and close and the numbers are exactly as what we expected
accounts payable in guyana dollars becomes 80 which is what we owe and delivery expense
in terms of us dollars became 738 and 40 cents so now we continue our example and let's imagine on
april 8th we transferred in enough money from the chase bank account to the guyana bank account to
be able to pay the whole bill from gina casino on april 8th the guyana dollar was worth only 0.007
of the us dollar so to make sure that we transfer 10 000 guyana dollars we deposited and transferred
70 u.s dollars into our guyana bank account and that became 10 000 guyana dollars
that we will then pay from so what will be the result just after transferring the money well
the bank of guyana increases to 70 us dollars because that's what the 10 000 guyana dollars
were worth at the moment we transferred it and if 70 us dollars transferred to the guyana bank
that means the chase bank account here in america decreased by seventy dollars and becomes two
thousand four hundred ninety three dollars at the moment we transfer the 10 000 units of currency
at point zero zero seven so these will be the results after the transfer
on april 8th we click banking transfer funds we put the date april 8 and we're transferring
from the american bank account with chase to the bank of guyana and the number of guyanese dollars
that we're transferring at the moment uh that we transfer is ten thousand and the exchange rate
at this moment is only seven point zero seven it happens to be there if not then you would
put it there now when we click save and close the results are exactly as what we expected
the bank of guyana now shows 70 u.s dollars for the 10 000 that we put and the chase bank
account was decreased by 70 us dollars and it's the exact number that we predicted or expected
now let's continue the example and on the same day april 8 we actually pay gina the 10 000 guyanese
dollars that we owe her so at the moment we pay on the same day of the transfer what is the gain
well we originally owed 80 u.s dollars because that was what it was worth when we got the bill
but at the moment we pay we only owe 70 u.s dollars because the 10 000 guyana dollars what
that we owe are now only worth 70 us dollars so the decrease per guyana dollar is .001
and that means that when we go to pay this bill we will have a gain of 10 u.s dollars because we
actually owe ten dollars less from the moment we owed the money till the moment we paid as a result
of the exchange gain so what will be the result after we after we pay well both the bank of guyana
and accounts payable guyana should both become zero bank of guyana becomes zero because we gave
all 10 000 units to gina and accounts payable guyana should become zero because we gave
all ten thousand units to gina but we had a ten dollar gain which will increase our net
gain or loss on exchange and it will become thirty one dollars and fifty cents let's go ahead and pay
the bill we click vendors pay bills and of course we're not paying from regular accounts payable
we're paying from account payable guyana dollar and now we see the only guyana dollar bill we have
is this one so we click the check mark because we're paying the whole bill quickbooks remembers
the payment date and the exchange rate that we put in a moment ago but be careful the money
is not coming from the chase bank account the money is coming from the bank of guyana
and that means the balance will go down to zero units of currency as we pay 70 u.s dollars
when we click pay selected bill and then click done the bank of guyana is zero because we paid
all ten thousand guyana dollars accounts payable guyana is zero because we owe no guyana dollars at
all and just like what we expected exchange gain or loss increased to the 31.50 that we
expected
you