Multicurrency Payment of Bills: To Pay a Foreign Currency Bill by Using the Base Currency

The following activity will walk you through the process of paying a bill in a foreign currency by using the base currency.

Story

Suppose that on January 16, 2023, SweetLife Fruits & Jams purchased transport services from Big Green Trucks Ltd. in the amount of 450 in Canadian dollars (C$450). The chief accountant of SweetLife decided to pay the bill from the company's 10200WH account, which is in USD, because there were not enough funds in the account in CAD (which is a foreign currency of the company). SweetLife agreed with the vendor to pay the bill in USD at the 0.796 exchange rate (1 USD = 1.256 CAD), so that the payment amount of $358.20 would pay the bill in full. On January 30, 2023, SweetLife paid the bill in USD (which is the company’s base currency).

Acting as a SweetLife accountant, you need to process the bill in CAD and pay it in USD.

Before you perform these actions, you will make changes to the Big Green Trucks Ltd. vendor’s settings so that bill processing can be performed in line with its currency-related preferences.

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 10200 (Company Checking Account), 20000 (Accounts Payable), and 82010 (Realized Loss CAD) accounts have been created.

On the Vendors (AP303000) form, the Big Green Trucks vendor has been created.

Process Overview

Before processing a bill in a foreign currency, you will update the vendor’s currency-related settings on the Vendors (AP303000) form. On the Bills and Adjustments (AP301000) form, you will create and release a bill in CAD. On the Checks and Payments (AP302000) form, you will create a payment in USD and apply it to the bill to pay it in full. Finally, you will review the GL transaction generated by the system on the Journal Transactions (GL301000) form.

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 1/16/2023. If a different date is displayed, click the Business Date menu button, and select 1/16/2023 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 Configure Rates.

Step 1: Updating the Vendor's Settings

To update the currency-related settings of the vendor (which has been preconfigured in the U100 dataset) in preparation for multicurrency bill processing, do the following:

  1. Open the Vendors (AP303000) form.
  2. In the Vendor ID box, select GREENTRUCK.
  3. On the Financial tab (Financial Settings section), specify the following settings:
    • Currency ID: CAD

      This is the primary currency to be inserted in bills and adjustments to this vendor.

    • Curr. Rate Type: SPOT

      This setting specifies the currency rate type to be used for the vendor.

  4. On the Payment tab (Default Payment Settings section), in the Payment Method box, select WIRE.
  5. On the form toolbar, click Save to save your changes.

Step 2: Creating and Releasing a Bill

To create and release a bill in the CAD currency, 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: GREENTRUCK
    • Currency: CAD (inserted automatically when you selected the vendor; cannot be overridden in the bill)
    • Date: 1/16/2023
    • Post Period: 01-2023
    • Description: Transport services
  3. On the Details tab, click Add Row, and in the added row, specify the following settings:
    • Transaction Descr.: Transport services
    • Ext. Cost: 450
  4. On the form toolbar, click Save.
  5. In the Summary area, click View Base (right of the Currency box), and review the bill in the base currency. The Detail Total in USD is $352.89 (C$450 * 0.78419072, which is the currency rate that was effective on the document date).
  6. On the form toolbar, click Remove Hold.
  7. On the form toolbar, click Release to release the bill.
  8. On the Financial tab, click the Batch Nbr. link.
  9. On the Journal Transactions (GL301000) form, which opens, review the generated transaction in the base currency (USD).
    When the bill was released, the following actions were performed in the system:
    • The AP account of the vendor (20000) was credited in the total bill amount, which the system converted to the base currency by using the document exchange rate ($352.89 = Round (C$450 * 0.78419072)).
    • The Expense account specified in the bill (81000) was debited in the line amount, which the system converted to the base currency by using the document exchange rate ($352.89 = Round (C$450 * 0.78419072)).

Step 3: Creating a Payment for the Bill

To create a payment for the bill, do the following:

  1. Click the Business Date menu button, and select 1/30/2023 from the calendar.
  2. Open the Checks and Payments (AP302000) form.
  3. On the form toolbar, click Add New Record, and in the Summary area, specify the following settings:
    • Type: Payment
    • Vendor: GREENTRUCK
    • Payment Method: WIRE (inserted automatically when you selected the vendor)
    • Cash Account: 10200WH (Wholesale Checking)
    • Currency: USD (inserted automatically based on the selected cash account)
    • Application Date: 1/30/2023
    • Application Period: 01-2023
    • Description: Transport services
    • Payment Amount: 358.20
  4. On the table toolbar of the Documents To Apply tab, click Load Documents. The bill dated 1/16/2023 appears in the table.

    The payment is in the base currency because the specified cash account is maintained in the base currency. The amount to be applied to the selected document is currently $352.22 (C$450 * 0.7827176), which is the CAD-to-USD exchange rate that was effective on 1/16/2023. The system uses this rate as the default cross rate between the currency of the payment (USD) and currency of the bill (CAD).

    When the payment is applied to the bill, the bill will be fully paid, and its Balance will be equal to 0.00, while the payment will still have an open balance in the amount of $5.98. To close both the bill and the payment, you need to set the appropriate cross rate (0.796). After that, both the Balance of the bill and the Unapplied Balance of the payment will be 0.00 in both currencies.

  5. In the table, enter 0.796 in the Cross Rate column to use this rate in the payment application. Now the amount in the base currency that will be applied to the bill (Amount Paid) is equal to the Payment Amount.
  6. On the form toolbar, click Remove Hold.
  7. On the form toolbar, click Release to release the payment.
  8. On the Financial tab, click the Batch Nbr. link.
  9. On the Journal Transactions (GL301000) form, which opens, review the generated transaction.

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

    • The checking account specified in the payment (10200) was credited in the amount of the payment ($358.20).
    • The Accounts Payable account specified in the bill (20000) was debited in the total amount of the bill, which is the payment amount divided by the cross rate and multiplied by the bill rate, ($352.89 = Round ($358.20 / 0.796 * 0.78419072)), to decrease the vendor's outstanding balance and close the bill.
    • The realized loss account of the bill currency (82010), which you specified when you defined the CAD currency in Multicurrency Functionality: Implementation Activity) was debited in the amount of the realized loss, which is the amount of the payment in the base currency minus the original amount of the bill in the base currency ($5.31 = $358.20 – $352.89).