do you need to receive payment in a foreign currency in order to keep
certain customers well then you need to know how to record receiving payment in a foreign currency
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sometimes we need to receive payment in a foreign currency in order to have certain customers we
therefore must have a bank account that has funds in the currency of the other country
after the administrative tasks necessary to open an account with the other currency you are then
able to receive payments from customers who can only pay in their own home countries currency
when you receive payment from a customer into the foreign currency bank account the currency has a
specific value in us dollars on the day their payment is deposited quickbooks will remember
the dollar value per unit for each of the units of the currency you receive this value is from the
exchange rate on the day the customers payment was deposited into your foreign currency bank account
for example let's imagine on february 20 uh february of 2021 we started doing business with
henry goodman from guyana he pays us in guyanese dollars not us dollars in order to service him
we must agree to receive payment from him in guyanese dollars therefore
we must have an account in the first bank of guyana which is an account in a bank in guyana
in order to receive payment and guyanese dollars and possess units of this currency
you can click accounting in the left margin chart of accounts or click the cog wheel and click
chart of accounts then in the top right click new now obviously this is a bank type of account
and of course it is a checking account because it's something that we use when we operate
our business but currency in this account is guyana dollars and the name of the bank
bank of guyana save and close and now we have a bank account that has the ability
to accept payment in guyana dollars let's do the example transaction let's imagine on february 8th
we did legal services for henry goodman for ten 000 guyanese dollars and made an invoice for him
the guyana dollar at this moment february 8th is worth .005 dollars from the top left click new
invoice the date of the invoice is february 8th the customer is henry goodman
now the product or service is legal fees earned and the amount is 10 000 guyana dollars
now quickbooks thinks that the us dollar equivalent is 47.83 but we're determined
to make this at a different rate from what the quickbooks currency list remembers so make it .005
just for our illustration now we're not changing into the currency list we're changing it only for
this transaction so we click ok and we scroll down and you can see now quickbooks online understands
that we're billing this customer for fifty u s dollars because that's what these ten
thousand guyana dollars are worth on the day that we create the invoice when we click
save and close and we click reports trial balance you can see that accounts receivable
guyana dollar shows up for the first time as fifty dollars and legal fees earned or excuse me
income from legal services has increased by fifty dollars watch if i double click i can scroll down
and you can see henry goodman has an invoice that just increased our income in this account
by 50 u.s dollars quickbooks customer records will remember that accounts receivable guyana
has 10 000 units of currency in this case guyana dollars and each was promised to us
at the moment that each one was equal to .005 of a u.s dollar the most important thing to remember
is that quickbooks has this data about each unit of currency somewhere behind the scenes
you cannot check this but you will see the results of this and it will confirm that quickbooks tracks
all individual units of currency and what rate they were acquired at now you will see a
demonstration of this and you will see the result so let's continue with our example let's imagine
on february 11 we received payment for the henry goodman invoice now let's imagine on february 11th
that we only received five thousand of the ten thousand guyanese dollars listed on the
at the moment the money was deposited from henry into our guyana dollars bank account on february
11 each guyana dollar was worth .006 us dollars so what's the gain well the guyana dollar was .005
at the moment we made the invoice and now at the moment we're getting paid the guyana dollar is now
worth point zero zero six there is an increase per guyana dollar of point zero zero one and since we
received five thousand of the ten thousand that means the gain from this payment that we receive
is five dollars five us dollars worth of guyana dollars anyway five u.s dollars is the gain
because it's point zero zero one of a dollar times five thousand so what will be the result after
receiving the first five thousand guyana dollars well we received half of what is owed to us
so accounts receivable guyana will decrease from 50 to 25. however we received 30 u.s dollars
worth of guyana dollars deposited into the bank account so first bank of guyana will show up
for the first time with a thirty dollar balance because that is the us dollar equivalent
of the five thousand guyana dollars we received at the moment the exchange rate was .006 and the five
dollar difference goes to exchange gain or loss so instead of having a three dollar and seventy
cent debit adding five dollars on the credit side makes a net credit or a net gain of a dollar 30.
these will be the numbers if we properly record this transaction we click new receive payment
the date was february 11 the customer henry goodman now the rate that we received the payment
0.00 of the us dollar we do not want to change this rate on the currency list we only want to
change it for this transaction so we click ok and we put in the number of guyana dollars received
and of course 5 000 are applied to the 10 000 guyana dollar invoice and quickbooks is telling us
we just physically received thirty u s dollars worth of guyana dollars we click save and close
and the results are exactly as what we expected the bank of guyana shows up on the trial balance
for the first time as thirty dollars the accounts receivable for guyana dollars is exactly half what
it was a moment ago because we received half of the guyanese dollars that we were promised
and the exchange gain or loss is the result that we expected
now to properly learn this we have to follow through and finish our example let's imagine
on february 15th we received payment for the henry goodman invoice we received the remaining thousand
of the ten thousand guyanese dollars listed on the invoice at the moment the money was received from
henry each guyana dollar was worth point zero zero seven u s dollars so what was the gain well the
remaining five thousand guyana dollars on the open invoice are still valued by our quickbooks at .005
per dollar because quickbooks remembers that was the value at the moment the invoice was made
the dollar is now .007 guyana dollars so the increase per guyana dollar is .002
from the time that we made the invoice and the time we're getting paid these last
five thousand so if you take the increase per unit and multiply by how many units you get the gain
that we're going to have as a result of receiving the balance of the invoice several days later when
the dot when the guyana dollar has now increased by point zero zero two so what will the result be
after we receive payment on february 15th well we received all of the money for the open invoice
so the accounts receivable guyana should go down to zero and the amount in u.s dollars of 5 000
units times 0.007 would mean we received 35 us dollars into our guyana bank account
making the balance of the bank of guyana 65 and the difference between the 65 the 35 dollars
that increased our bank account and the 25 dollars that was on the invoice is a ten
dollar gain so the net gain will increase by ten dollars and become eleven dollars and thirty cents
and these will be the numbers after receiving the february fifteenth
payment where the guyana dollar has increased let's take a look at how to record it
we again click new receive payment and of course the date this time is february 15th
the customer is henry goodman and we know we're depositing the money to the bank of guyana
and there's 5 000 guyana dollars remaining but today the rate that we're receiving the payment at
0.007 usd click ok and we are receiving the remaining 5000 guyanese dollars
of course we click save and close and the results are exactly as what we expected
bank of guyana has increased to sixty five dollars because we now have thirty dollars from the first
payment and thirty five from this payment and accounts receivable guyana dollars has become
zero because we now own we are now receiving in the future
no guyana dollars all 10 000 of those units have been paid and the exchange
gainer loss has increased to eleven dollars and thirty cents gain exactly as what we expected
you