Debit Adjustments in Foreign Currencies: Process Activity

The following activity will walk you through the process of applying a debit adjustment to an AP bill.

Story

Suppose that on January 15, 2024, SweetLife Fruits & Jams purchased additional services from the MapleLeaf Co. vendor in the amount of 100 Canadian dollars (C$100). On January 30, SweetLife received a C$5 credit memo from MapleLeaf to reduce the cost of the purchased services. SweetLife agreed with the vendor to pay half of the bill amount on February 10.

Acting as a SweetLife accountant, you need to apply this payment and the debit adjustment to the bill.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

• On the Enable/Disable Features (CS100000) form, the following features have been enabled:
  • Standard Financials, which provides the standard financial functionality
  • Multibranch Support, which supports multiple branches in your instance of MYOB Acumatica
  • Multicompany Support, which supports multiple companies within one tenant.
  • Multicurrency Accounting, which enables multicurrency operations in the system
• On the Companies (CS101500) form, the SWEETLIFE company has been defined.
• On the Branches (CS102000) form, the HEADOFFICE branch of the SWEETLIFE company has been created.
• On the Chart of Accounts (GL202500) form, the 20000 (Accounts Payable), 42010 (Realized Gain CAD), 81000 (Other Expenses), 82010 (Realized Loss CAD), and 83100 (Rounding Gain/Loss) accounts have been created.
• On the Vendors (AP303000) form, the MAPLELEAF vendor has been predefined.

Process Overview

In this activity, on the Bills and Adjustments (AP301000) form, you will create and release a bill in the CAD currency, and then you will create and release a debit adjustment. On the Checks and Payments (AP302000) form, you will create a payment in CAD and apply the bill and the debit adjustment to this payment to partially pay the bill. Finally, on the Journal Transactions (GL301000) form, you will review the GL transaction generated by the system on release of the payment and the applications.

System Preparation

Before you begin performing the steps of this activity, do the following:

1. Launch the MYOB Acumatica website with the U100 dataset preloaded, and sign in as an accountant Anna Johnson by using the johnson username and the 123 password.
2. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, make sure that the business date in your system is set to 1/15/2024. If a different date is displayed, click the Business Date menu button, and select 1/15/2024 from the calendar.
3. On the Company and Branch Selection menu on the top pane of the MYOB Acumatica 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 Configure Rates.
5. As a prerequisite activity, make sure that you have configured an account as described in Multicurrency Cash Accounts: To Configure an Account.

Step 1: Creating and Releasing a Bill

To create and release a bill, do the following:

1. Open the Bills and Adjustments (AP301000) form.
2. On the form toolbar, click Add New Record, and in the Summary area, specify the following settings:
   • Type: Bill
   • Vendor: MAPLELEAF
   • Currency: CAD (inserted automatically when you selected the vendor; cannot be overridden based on your changes to the settings of the MAPLELEAF vendor in AP Bills in Foreign Currencies: Process Activity)
   • Date: 1/15/2024
   • Post Period: 01-2024
   • Description: Additional services
3. On the Details tab, click Add Row, and in the added row, specify the following settings:
   • Transaction Descr.: Additional services
   • Ext. Cost: 100.00
4. On the form toolbar, click Save to save your changes.

   The bill is created with a currency rate of 0.78419072, which is the rate that was effective on the document date.

5. On the form toolbar, click Remove Hold.
6. On the form toolbar, click Release to release the bill.

Step 2: Creating a Debit Adjustment

To create a debit adjustment, do the following:

1. While you are still on the Bills and Adjustments (AP301000) form, click Add New Record on the form toolbar, and specify the following settings in the Summary area:
   • Type: Debit Adj.
   • Vendor: MAPLELEAF
   • Currency: CAD (inserted automatically when you selected the vendor; cannot be overridden)
   • Date: 1/30/2024
   • Post Period: 01-2024
   • Description: Discount on services
2. On the Details tab, click Add Row, and in the added row, specify the following settings:
   • Transaction Descr.: Discount on services
   • Ext. Cost: 5.00
3. On the form toolbar, click Save to save your changes.

   The currency rate specified for the debit adjustment is 0.7827176, which is the effective rate on the document date. The bill to which you are going to apply the debit adjustment was created with a currency rate of 0.78419072. When you apply the debit adjustment to the bill, the operation will produce a realized gain, which is due to the difference of the currency rates.

4. On the form toolbar, click Remove Hold.
5. On the form toolbar, click Release to release the debit adjustment.
6. On the Financial tab, click the Batch Nbr. link.
7. On the Journal Transactions (GL301000) form, which opens, review the generated transaction in the base currency (USD).

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

   • The AP account of the vendor (20000) was debited in the debit adjustment amount, which the system converted to the base currency by using the document rate ($3.91 = Round (C$5.00 * 0.7827176)) to decrease the vendor balance.
   • The Expenses account of the vendor (81000) was credited in the debit adjustment amount ($3.91 = Round (C$5.00 * 0.7827176)).

Step 3: Creating a Payment; Applying the Payment and the Debit Adjustment to the Bill

To create a payment and to apply it and the debit adjustment to the bill, do the following:

1. Open the Checks and Payments (AP302000) form.
2. On the form toolbar, click Add New Record, and in the Summary area, specify the following settings:
   • Type: Payment
   • Vendor: MAPLELEAF
   • Payment Method: WIRE (inserted automatically when you select the vendor)
   • Cash Account: 10215WH (Checking Account CAD)
   • Currency: CAD (inserted automatically when you select the cash account)
   • Application Date: 2/10/2024
   • Application Period: 02-2024
   • Description: Partial payment on additional services
   • Payment Amount: 45.00

     The payment is created with a currency rate of 0.78758762, which is the effective rate on the payment date.

3. On the toolbar of the Documents to Apply tab, click Load Documents.

   The bill and debit adjustment that you have prepared earlier appear in the table. For the debit adjustment in the table, when you specify the Amount Paid, the payment balance available for application increases by this amount.

4. On the form toolbar, click Remove Hold.
5. On the form toolbar, click Release to release the payment and the applications.
6. Review the Application History tab.

   On release of the payment and the applications, the system generated a GL batch that includes the transactions produced by the payment and its applications. The reference number (which is a link) to the generated transaction is shown in the Batch Number column.

7. Click the link in the Batch Number column.
8. On the Journal Transactions (GL301000) form, which opens, review the generated transaction in the base currency (USD).

   When the payment and applications were released, the following actions were performed in the system:

   • The checking account specified in the payment (10215, which you created in Multicurrency Functionality: Implementation Activity) was credited in the amount of the payment ($35.44 = Round (C$45.00 * 0.78758762)).
   • The AP account specified in both the bill and the debit adjustment (20000) was debited in the amount deducted from SweetLife's liability to the vendor. This amount is the difference between the debit adjustment amount and the amount to which the bill balance is decreased: ($35.30 = Round (–C$5.00 * 0.7827176) + Round (C$50.00 * 0.78419072)).
   • The realized gain account was credited to the realized gain account of the currency (42010) associated with the bill. You specified this account when you defined the currency in Multicurrency Functionality: Implementation Activity. The system calculated the gain amount as the difference between the application amount converted to the base currency by using the exchange rate of the debit adjustment and the application amount converted to the base currency by using the exchange rate of the payment: (–$0.03 = Round (C$5 * 0.7827176) – Round (C$5 * 0.78758762)).
   • The realized loss account was debited to the realized loss account of the currency (82010, which you specified when you defined the currency in Multicurrency Functionality: Implementation Activity) associated with the debit adjustment. The system calculated the loss amount as the difference between the application amount converted to the base currency by using the exchange rate of the payment and the application amount converted to the base currency by using the exchange rate of the bill ($0.17 = Round (C$50 * 0.78758762) – Round (C$50 * 0.78419072)).