User Guide

Foreign Currencies
Workbook 117
S
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Exercise 33: Entering Transactions in a Foreign Currency
This exercise is in three parts. In part 1, you will prepare Simply
Accounting to accept foreign currency transactions. In part 2,
you will set up a foreign currency. In part 3, you will create a
foreign customer, and sell that customer an item.
Part 1: Preparing to Use Foreign Currency
Before you set up a foreign currency, you must add an account
to track exchange-rate changes and rounding.
Exchange-rate
changes
When you purchase or sell an item, payment is often made or
received in the future. If the item’s price is in a foreign currency,
the exchange rate may change before payment. This means that
the equivalent price in your home currency also changes.
Sometimes this works in your favour, sometimes not.
Let’s say you purchase an item for $100 US. On the day of the
purchase, the exchange rate is 1.45, so the price in Canadian
dollars is $145. Some time later, when you are ready to pay the
vendor’s invoice, the exchange rate has changed, and the US
dollar is worth $1.40 CDN. You pay your vendor $100 US (worth
$140 CDN). You have gained $5 CDN.
Rounding
The final price of an item paid for in foreign currency may also
change due to rounding that occurs when the exchange rate is
calculated.
For example, if you purchase two items and pay in a foreign
currency, US dollars, the entries might appear as follows. The
foreign currency is worth 1.5997033 Canadian dollars.
Account Foreign Currency
Amount
Debits Credits
1540
Hardware
534.99 855.83
1560 Lumber 35.00 55.99
2220 Accounts
Payable 569.99 ______ 911.81
Total: 911.82 911.81