Multiple Currencies Example
In this example, a company posts a customer invoice in Maconomy using Danish Krone (DKK) as the job currency, Euros (EUR) as the base currency, and US Dollars (USD) as the enterprise currency.
The invoice is posted on January 5 with a total billing price of DKK 100.00. Maconomy converts this amount into EUR and USD.
| Date | Job Currency (DKK) | Base Currency (EUR) | Enterprise Currency (USD) | |
|---|---|---|---|---|
| 01.05 | Invoice on account printed | 100.00 | 17.00 | 20.00 |
On January 10, the customer pays the amount stated on the invoice. Maconomy posts a new G/L entry registering the payment, and automatically converts the amount according to the exchange rate on this date.
| Date | Job Currency (DKK) | Base Currency (EUR) | Enterprise Currency (USD) | |
|---|---|---|---|---|
| 01.05 | Invoice on account printed | 100.00 | 17.00 | 20.00 |
| 01.10 | Customer Payment | 100.00 | 16.50 | 20.25 |
Because the exchange rate varies between the date of posting of invoice and payment, the company has an exchange rate loss in the base currency, and a gain in enterprise currency. Maconomy posts an entry to show a loss in base currency. A balancing entry is also created to track the exchange rate gain in enterprise currency.
Balancing entries are created by Maconomy when you have opposite exchange rate variances in base and enterprise currency. When the invoice is reconciled, the balancing entry provides a figure which does not currently add up to the total amount. In this example, because exchange rate fluctuations caused different variances in base and enterprise currencies, the balancing entry provides the difference in enterprise currency. When you sum up the amounts in all postings (payment, exchange rate loss, balancing entry), you get an accurate figure that is similar to the amount provided in the first posting (invoice).
| Date | Job Currency (DKK) | Base Currency (EUR) | Enterprise Currency (USD) | |
|---|---|---|---|---|
| 01.05 | Invoice on account printed | 100.00 | 17.00 | 20.00 |
| 01.10 | Customer Payment | 100.00 | 16.50 | 20.25 |
| Exchange Rate Loss | 0.00 | 0.50 | 0.66 | |
| Balancing Entry | 0.00 | 0.00 | -0.91 |
Similarly, when you post vendor invoices and send payment on a later date, Maconomy automatically creates entries as stated in the example.
When working with multiple currencies on a job that uses a fixed exchange rate (either on the job itself or specific invoices on account on the job), Maconomy creates entries for exchange rate variances that occur due to the fixed exchange rate, and the exchange rate fluctuations that occur between the date of posting invoices and the date of payment.
When invoice on allocation is posted on the job, an entry is created as an unrealized exchange rate gain or loss. When the vendor entry is posted, the amount is recognized as realized exchange rate gain or loss and is moved to the account assigned for realized exchange rate variance.