Credit Memos in Foreign Currencies: Process Activity

The following activity will walk you through the process of creating a credit memo in a foreign currency and applying it to an invoice in the same currency.

Story

Suppose that on February 1, 2023, SweetLife Fruits & Jams provided consulting services to the EasyDiner customer in the amount of 80 euros (€80). On February 15, 2023, SweetLife gave a discount on these services and issued a €5 credit memo to the customer.

Acting as a SweetLife accountant, you need to create this credit memo and apply it to the invoice.

Configuration Overview

For the purposes of this activity, the following features have been enabled on the Enable/Disable Features (CS100000) form:

  • Standard Financials, which provides the standard financial functionality
  • Multibranch Support, which supports multiple branches in your instance of MYOB Advanced
  • Multicompany Support, which supports multiple companies within one tenant.
  • Multicurrency Accounting, which enables multicurrency operations in the system

On the Chart of Accounts (GL202500) form, the 11000 (Accounts Receivable), 40000 (Sales Revenue), and 83000(Realized Gain/Loss Currency) accounts have been created.

On the Customer Classes (AR201000) form, the INTLCA (Canadian Customers) customer class has been predefined.

On the Customers (AR303000) form, the EasyDiner customer has been predefined.

Process Overview

In this activity, you will update the EasyDiner customer's settings on the Customers (AR303000) form, specifying the EUR currency for this customer. On the Invoices and Memos (AR301000) form, you will create the invoice to which you will later apply the credit memo and then release this invoice.

On the same form, you will create a credit memo for the customer in the EUR currency and then release this credit memo. On the Payments and Applications (AR302000) form, you will apply the credit memo to the invoice and release the application. On the Journal Transactions (GL301000) form, you will review the GL transaction generated by the system to record the realized loss for the currency. Finally, on the Invoices and Memos form, you will review the balance of the invoice to make sure it has been decreased by the credit memo.

System Preparation

To prepare the system for the steps of this activity, do the following:

  1. Launch the MYOB Advanced website, and sign in to a company with the U100 dataset preloaded. To sign in as an accountant, use the following credentials:
    • Username: johnson
    • Password: 123
  2. In the info area, in the upper-right corner of the top pane of the MYOB Advanced screen, make sure that the business date in your system is set to 2/1/2023. If a different date is displayed, click the Business Date menu button, and select 2/1/2023 from the calendar.
  3. On the Company and Branch Selection menu, also on the top pane of the MYOB Advanced screen, make sure that the SweetLife Head Office and Wholesale Center branch is selected. If it is not selected, click the Company and Branch Selection menu button to view the list of branches that you have access to, and then click SweetLife Head Office and Wholesale Center.
  4. As a prerequisite activity, make sure that the multicurrency accounting functionality has been configured as described in Multicurrency Functionality: Implementation Activity and Configuration of Rate Types and Rates: To Set Up Refreshing of Rates.

Step 1: Updating the Customer’s Settings

To update the currency-related customer settings in preparation for the application of a credit memo, do the following:

  1. Open the Customers (AR303000) form.
  2. In the Customer ID box, select EASYDINER.
  3. On the Financial tab (Financial Settings section), specify the following settings:
    • Currency ID: EUR
    • Enable Rate Override: Selected
  4. On the Payment Methods tab, for the WIRE method, select the Is Default check box.
  5. On the form toolbar, click Save to save your changes.

Step 2: Creating and Releasing an Invoice

To create an AR invoice in the EUR currency, do the following:

  1. Open the Invoices and Memos (AR301000) form.
  2. On the form toolbar, click Add New Record, and in the Summary area, specify the following settings:
    • Type: Invoice
    • Customer: EASYDINER
    • Currency: EUR (inserted automatically when you selected the customer)

      The system automatically inserted this currency because you specified it for the customer. The Enable Currency Override check box is cleared for the customer on the Financial tab of the Customers (AR303000) form, so this currency is the only currency that is allowed for the customer. It cannot be overridden in the document.

    • Date: 2/1/2023
    • Post Period: 02-2023
    • Description: Consulting services
  3. On the Details tab, click Add Row, and in the added row, specify the following settings:
    • Transaction Descr.: Consulting services
    • Ext. Price: 80

    The invoice is created with a currency rate of 1.11520018 which is effective on the document date.

  4. On the form toolbar, click Remove Hold.
  5. On the form toolbar, click Release to release the invoice.

Step 3: Creating and Releasing a Credit Memo

To create a credit memo in the EUR currency, do the following:

  1. On the Invoices and Memos (AR301000) form, click Add New Record, and in the Summary area, specify the following settings:
    • Type: Credit Memo
    • Customer: EASYDINER
    • Date: 2/15/2023
    • Post Period: 02-2023
    • Description: Discount on consulting services
  2. On the Details tab, click Add Row, and in the added row, specify the following settings:
    • Transaction Descr.: Discount on consulting services
    • Ext. Price: 5

    The currency rate specified for the credit memo is 1.1411617, which is the effective rate on the document date. The invoice on which the discount is given was created with a currency rate of 1.11520018. If you apply this credit memo to the invoice, the operation will produce a realized loss, which is due to the difference of the currency rates.

    Tip: If you want to apply the credit memo to the invoice without a realized gain or loss, you need to change the currency rate of the credit memo to the rate specified in the invoice.
  3. On the form toolbar, click Remove Hold.
  4. On the form toolbar, click Release to release the credit memo.
  5. On the Financial tab, click the Batch Nbr. link.
  6. On the Journal Transactions (GL301000) form, which opens, review the generated batch in the base currency (USD).

    When the credit memo was released, the following actions were performed in the system:

    • The Accounts Receivable account of the customer (11000) was credited in the amount of the credit memo; the system converted the amount to the base currency by using the document rate ($5.71 = Round (€5.00 * 1.1411617)) to decrease the customer's debt.
    • The Sales account of the customer (40000) was debited in the amount of the credit memo ($5.71 = Round (€5.00 * 1.1411617)) to increase the realized loss produced by the invoice.

Step 4: Applying the Credit Memo to the Invoice

To apply the credit memo to the invoice, do the following:

  1. On the form toolbar of the Invoices and Memos (AR301000) form with the credit memo opened, click Apply.
  2. On the Payments and Applications (AR302000) form, which opens, make sure that the following settings are specified:
    • Application Date: 2/15/2023
    • Application Period: 02-2023
  3. On the table toolbar of the Documents to Apply tab, click Load Documents. Leave the default settings in the Load Documents dialog box, which opens, and click Load.

    When you click Load, the dialog box closes, and the invoice dated 2/1/2023, to which the memo will be applied, appears in the table of the Documents to Apply tab.

  4. On the form toolbar, click Release to release the application.
  5. Review the Application History tab. When the system applied the credit memo to the invoice, it generated a GL transaction, whose reference number is shown in the Batch Number column.
    Note: If the application did not produce realized gain or loss, no transaction would be generated on release of the application; thus, the Batch Number column would be empty for the application on the Application History tab.
  6. Click the link in the Batch Number column, and on the Journal Transactions (GL301000) form, which opens, review the generated GL transaction in the base currency.

    When the application was released, the following actions were performed in the system:

    • The AR account specified in the invoice (11000) was debited in the amount of the realized gain, which has been calculated as follows: $0.13 = Round (€5.00 * 1.11520018) – Round (€5.00 * 1.1411617)).
    • The realized gain/loss account of the document currency (83000) was credited in the amount of $0.13 to record the realized gain.
  7. On the Invoices and Memos (AR301000) form, open the invoice to which you applied the credit memo, and review the Applications tab.

    The balance of the invoice has decreased by €5.00 and is now €75.00.