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
when you first bill for service in another currency this is what happens you must first
download the current rate of exchange for that currency before recording a transaction
in that currency this will establish the initial value or let's call it the starting value
of the currency for any future gain or loss it is the exchange rate on the day of the first
transaction you will input the transaction with the number of units in the other currency and the
amounts that quickbooks records into your accounts and into the customer or vendor records will be
the dollar equivalent or let's say the home currency equivalent amount of the transaction so
let's go ahead and download the exchange rate for rubles so that we can do a service with rubles
well we would have to click we have to come here and click lists and then go to currency list
now notice ruble is one of the currencies that we activated in the prior video
so we click on ruble and we click activities and we click download latest exchange rates
it's actually going to do that for all of the active currencies download latest exchange rates
and we simply wait for the computer to connect to the internet and establish the rates as of today
january 11 2021 and it means that one us dollar is equal to point zero one three three seven rubles
and now let's do our example let's imagine on january 11 of 2021 we did legal services for
yuri bury 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 ten thousand 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 point zero one three three seven 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 a hundred and
thirty three dollars and seventy cents 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
so let's go ahead and make the invoice customer create invoice now the customer is yuri bury
notice automatically quickbooks remembers that he needs to pay us in rubles or we need to bill
him in rubles in the future the date was january let's make it january 11th instead of the 10th
and the item of service is legal services rendered now
in this example there is no quantity or price each it's just a flat fee for legal services
but watch what happens at the bottom here by the way notice quickbooks remembered
the exchange rate that we just downloaded and in a future example we can actually change this
at the moment we record the transaction but we will not in this first example we will type
in 10 000 because that's the number of units in the other currency the ruble
and quickbooks will show the us dollar equivalent of the ruble as the balance of the invoice
notice the accounts receivable account that it gets recorded in is the specific one for rubles
when we click save and close we can open the trial balance and you can see the results are
exactly as what we expected income from legal fees increased to twenty seven thousand one hundred
thirty three seventy and accounts receivable what's owed to us in rubles or the dollar value
of what's owed to us in rubles is a hundred thirty three dollars and seventy cents
if we click on the open invoice report you can see that yuri bury owes us 133.70
even though from his point of view he owes that amount in rubles
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 0.0133 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 .00063 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 30 cents it's very easy to multiply times 10 000 just move the decimal
point over and you see if the gain was .0063 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 a hundred thirty three dollars and seventy cents 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 30 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 main menu we click
customers receive payment now the date we're getting paid in this example is january 15th
and the person who's paying us is yuri notice when we choose yuri the payment changes to rubles
and yuri's open invoice shows up here now of course we're going to click the check mark
because we are imagining that we got paid the entire amount of the invoice however
if the currency is being converted and then deposited directly into our bank account
before you know after it becomes ruble after it changes from rubles to dollars
what's happening is yuri is paying through a platform that changes the 10 000 rubles to dollars
and then deposits that money into our bank account so we cannot let it go into undeposited funds
we must record it deposited into the chase bank account on the day the bank got the money
now regarding the amount of money we will now change the exchange rate on the day that we got
paid to point zero one four and push tab notice as soon as you do that the dollar amount received
in the bottom right of the invoice changes as soon as we manually change the exchange rate ourselves
now i will not get into the reasons why you would have to change the exchange rate yourself
at the moment you record a transaction instead of downloading the new latest exchange rate
that will be a topic for another video but for now just understand we have to change the exchange
rate manually at the moment we receive payment and that makes a hundred and thirty three dollars
become a hundred and forty dollars but now when we click save and close you can see the result and
the trial balance is exactly as what we expected we have zero rubles that we will receive in the
future and our bank account has increased to the money amount we predicted 2540 and exchange gain
or loss shows up for the first time as six dollars and 30 cents and if you'd like to see where on the
profit and loss this exchange gain or loss shows up we open the profit and loss and you can see
here's your ordinary net income from your normal service fees and expenses
then anything unusual that has nothing to do with your operations shows up below net ordinary income
and the exchange gainer loss is six dollars and thirty cents and it increases your net income
because it's a slight gain don't worry that it has a negative a minus in front of it
other income is six dollars and 30 cents and it increased your overall net
income you