would you like to use the quickbooks online multi-currency feature without a problem
well then you should make sure that you know all about adjustment issues
with the quickbooks online multi-currency feature
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 like
and don't forget to subscribe to get updates on new videos that come out all the time so why do
we need to make a home currency adjustment before we remove the foreign units from the foreign bank
account well although quickbooks is so great if you do not make a home currency adjustment before
you pay from the account with the other currency the account balance in dollars will be out of sync
with the number of units of currency in the account now what am i talking about well
in the prior video the balance of the bank of guyana was worth 65 u.s dollars
and that's because we had previously acquired 5 000 guyanese dollars at the rate of
zero zero six and then on a later date we acquired another five thousand guyanese dollars
at the rate of point zero zero seven now the first five thousand of guyana dollars were worth 30 us
dollars and the second five thousand were worth 35 u.s dollars if you multiply across and that's
the reason why all 10 000 of the guyana dollars and the bank account are equal to 65 u.s dollars
now in our example instead of doing a home currency adjustment like we should before we pay
we simply put the point zero zero eight dollars per guyana in the exchange rate window when we
record the payment so we put it here instead of making a formal home currency adjustment
so what happens well quickbooks will remove all ten thousand of the guyana dollars
so you will have zero units of the currency in the account but they will be removed at the rate of
point zero zero eight not the rate they went in at the number of guyana units goes down to zero
and in reality you have a fifteen dollar gain like we did in the last video however
because you did not do a home currency adjustment before you paid
instead of recording the gain quickbooks will record a change in the balance of the bank account
for the whole amount of the dollar value of the expense that you paid now that's the crucial
point let me say it again because you did not do a home currency adjustment before you paid
instead of recording again quickbooks will record a change in the balance of the bank account
for the whole amount of the dollar value of the expense that you paid
so what should quickbooks record well it should record paying eighty dollars for the expense
and you have a fifteen dollar gain at the moment you pay that expense but what will it record
instead of a fifteen dollar gain it will instead put the bank balance as minus fifteen dollars
even though you paid all of the guyana dollars out of the bank account for example let's imagine on
february twenty eight we paid gina casino a vendor in guyana 10 000 guyanese dollars for a delivery
the guyana dollar was worth .008 on the day that we paid so what should be the result
well the guyana bank balance should only go down to 65 dollars because we only have 65 us dollars
worth of guyana in that account okay it should become zero and there should be zero units left
in the account the delivery expense should appear on the trial balance increased by eighty dollars
because that's really the value of what you paid for the service at the moment you paid it
even though you paid ten thousand guyana dollars it was worth eighty dollars of delivery at the
moment you paid it and the gain on the exchange of the guyana dollars should increase to by 15
and make it i think 26 30 or whatever it was when we did it properly in the prior video however what
will be the result well the delivery expense or whatever service you pay for must increase by the
us dollar value of the service at the moment you paid and you paid all ten thousand guyana dollars
and that's why it goes up by eighty dollars you're paying all of the guyana dollars in the account
but instead of recording the fifteen dollar gain the guyana bank balance will decrease
by the whole eighty dollars and even though there are zero units left the balance of
the guyana bank account will unfortunately go down to negative 15 even though it should be
zero because there are zero units left it means that the guyana bank account
will be out of sync regarding the value of each unit compared to the balance of the account
now if we pay for delivery 80 us dollars or all 10 000 guyana dollars what should be the proper
result well we paid 80 worth of us dollars worth of delivery so delivery expense should
increase by eighty dollars and we paid all of our guyana dollars we paid ten thousand
so the balance should go down to zero and the 15 should increase the gain and bring
it up to what it was in the previous video but unfortunately it will not unfortunately what's
going to happen is that even though delivery expense will increase by 80 as it should
the balance of the bank of guyana is going to become negative 15 instead of zero
and it will not include a gain at all so there are zero units of currency but the balance is negative
watch so here we are in the trial balance as if we never made the revalue currency adjustment
now let's record the payment of guyana dollars for delivery on february 17th we click new expense
the date would be february 17th the vendor we pay is gina casina
now remember we're paying from the guyana dollar bank account and she gives us delivery service
and the number of guyana dollars that we are giving gina is 10 000 and the rate the rate that
the guyana dollar is at the moment we pay is point zero zero eight of the us dollar just click ok
because this is for illustrative purposes now watch what happens when we click save and close
so when we come back to the trial balance you can see that delivery expense is correct
because it increased by 80 u.s dollars because that's what those 10 000 guyana dollars were worth
at the moment we paid for the delivery but notice instead of increasing or excuse me
instead of decreasing the gain what it did was it made the balance of the bank account negative
that 15 should be an exchange gain or loss increasing the gain but instead
if that 15 is incorrectly recorded in the bank of guyana making it a negative balance
so we have zero units of guyana dollars that we own there are physically no guyana dollars in
the bank account but the balance in quickbooks is showing negative 15. so what's the solution
the solution is to delete the transaction make the home currency adjustment and record
the transaction again so i deleted the payment that i just recorded
and you can pause the video and delete the payment that if you followed along and the numbers are
back the way they were before the payment the proper thing is to do the re-value currency
before you pay the money out of the foreign bank account click the cog wheel go over to currency
now you go to the row of the guyana dollar and click re-value currency that now remove
the check mark here the date that you are evaluating is february 17th remove the check
mark click custom rate remove you have to keep removing the check mark or it won't work for you
change this to point 0.008 and now when the check mark goes on you see the proper gain or loss click
revalue and save you go to the trial balance and now the numbers are what they need to be
before you record the payment the full gain has already been recorded and the fifteen dollars
has been added to exchange gain or loss and the bank of guyana is at the proper balance
for february seventeenth eighty dollars now we can make the payment we click the cog wheel
excuse me we click the new menu and we go to check we make sure that we are paying from the bank
account of guyana we make sure the rate is exactly what the rate is recorded in the bank of guyana
in our records as of the appropriate payment date and we're paying gina casina and we're paying her
for delivery expense and we're paying all of the 10 000 u.s dollars i mean excuse me
we're paying all of the 10 000 guyana dollars that we have in the bank account
we click save and close yes and now you see that the proper balance of the bank account of guyana
is zero the proper amount of delivery expenses 80 us dollars because that was the value
of the delivery that we paid and it increased it to 580 dollars
you