Multi-Currency Transactions and Forex Processing

Complete Video Guide

Watch this comprehensive tutorial covering all aspects of Forex processing:

Video: Complete Forex Processing Walkthrough

Overview

Leapcount automatically handles foreign currency transactions by:

  • Calculating exchange gains/losses in real-time
  • Generating proper journal entries for both realized and unrealized Forex differences
  • Providing month-end processing for outstanding transactions

Foreign Currency Expenses

When paying an expense in a different currency:

  1. Select a foreign currency document (invoice/bill)
  2. System calculates Forex difference based on:
    • Document rate (when invoice was created)
    • Current effective rate
  3. Displays gain/loss before payment completion
Foreign currency expense payment
Figure 1: Expense payment with Forex loss calculation

Key Fields:

  • Currency Rate: Shows current conversion rate
  • Foreign Exchange Gain/Loss: Calculated difference
  • Amount: Shows both transaction and base currency amounts

Example Scenario:

  • Document amount: MYR 25.00 (created at 1 MYR = 0.30 SGD)
  • Payment rate: 1 MYR = 0.32 SGD
  • Result: SGD 0.50 loss (25 × (0.32-0.30))

Foreign Currency Income

When receiving payment on a foreign currency invoice:

  1. Select the foreign currency invoice
  2. System compares:
    • Invoice rate (when created)
    • Payment date rate
  3. Displays calculated gain/loss
Foreign currency income receipt
Figure 2: Income receipt with Forex gain calculation

Example Scenario:

  • Invoice amount: MYR 6.00 (created at 1 MYR = 0.30 SGD)
  • Payment rate: 1 MYR = 0.32 SGD
  • Result: SGD 0.12 gain (6 × (0.32-0.30))

Journal for Forex Transactions

The system automatically creates balanced journal entries that:

  1. Record the transaction in both currencies
  2. Post gains/losses to designated accounts
  3. Maintain proper accounting treatment
Forex journal entry example
Figure 3: Automatic journal entry for Forex transaction

Expense Journal Example:

Accounts Payable (MYR) 25.00 MYR (8.00 SGD) [Debit] Petty Cash 25.00 MYR (8.00 SGD) [Credit] Loss on Foreign Exchange 0.50 SGD [Debit] Petty Cash 0.50 SGD [Credit]

Income Journal Example:

Petty Cash 6.00 MYR (1.92 SGD) [Debit] Accounts Receivable 6.00 MYR (1.92 SGD) [Credit] Petty Cash 0.12 SGD [Debit] Gain on Foreign Exchange 0.12 SGD [Credit]

Monthly Forex Processing

The Start of Month process handles unrealized gains/losses:

  1. Processes all outstanding foreign currency transactions
    • Accounts Payable
    • Accounts Receivable
  2. Calculates potential gain/loss using:
    • Original transaction rate
    • Current month-end rate
  3. Creates adjusting entries to:
    • Unrealized Gain/Loss accounts
    • Corresponding asset/liability accounts
Monthly Forex processing overview
Figure 4: Overview of the Start of Month Forex processing step
Forex Start of Month form
Figure 5: Confirmation form to process Start of Month Forex journals
Unrealized journal entry
Figure 6: Example of an unrealized Forex gain journal entry automatically generated

Process Workflow:

  1. Navigate to: Accounting Tools → Monthly Process
  2. Click Start of Month Process
  3. System:
    • Validates all Forex rates are current
    • Calculates unrealized gains/losses
    • Generates adjusting journal entries
  4. Review and approve entries

Best Practices

  1. Process monthly: Run Start of Month before closing
  2. Review regularly: Check Forex gain/loss accounts
  3. Document rates: Note significant rate changes
  4. Reconcile often: Clear foreign currency items promptly
  5. Monitor outstanding: Track aged foreign currency items

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