Banana Accounting 5.

Practical Guide to Multi-currency Accounting

This manual is addressed to those people who administer an accounting in more than one currency. Problems like exchange rates, rounding, revaluations and end-of-year closing are explained using simple examples. The guide also explains the questions and problems that Banana users submit directly to our technical support service on a daily basis.

Foreign currency accounts in an accounting file with EUR as basic currency

Note: the exchanges rates that are being used in this guide are taken at random.

Index
Practical Guide to Multi-currency Accounting..............................................................................1 Chapter 1 Currency conversion........................................................................................................4
Introduction................................................................................................................................................. 4 Variability of Exchanges............................................................................................................................. 4 Basic Exchange........................................................................................................................................... 4 Inverse Exchange ........................................................................................................................................ 5 Multiplier .................................................................................................................................................... 5 Precision...................................................................................................................................................... 5 Lowest Denomination................................................................................................................................. 6 Calculation of Exchange Rates and Values ................................................................................................ 6 Exchange Rates for Purchases and Sales .................................................................................................... 6 Currency exchange and Banknotes exchange (Premium)........................................................................... 6 Differences when Changing Back to Basic Currency................................................................................. 7 Total Differences through Splitting ............................................................................................................ 7

Chapter 2 Exchange Rates and Accounting Problems ...................................................................8

Multi-currency Accounting......................................................................................................................... 8 Basic Currency............................................................................................................................................ 8 Every Amount Has an Exchange Value in Basic Currency ........................................................................ 8 Account Currency ....................................................................................................................................... 8 Account Balance in Basic Currency ........................................................................................................... 9 Balances in another Currency (Currency2)................................................................................................. 9

Chapter 3 Chart of Accounts and Opening Balances...................................................................11

Assets and liabilities ................................................................................................................................. 11 Expenses and Income................................................................................................................................ 12 Foreign Exchange Rate table .................................................................................................................... 13 Define the Opening Exchange Rates ........................................................................................................ 14 Balancing the Balance Sheet (in Basic Currency) .................................................................................... 14 Rounding and Opening Differences.......................................................................................................... 15 Investments valued at the exchange rate from the time of purchase......................................................... 15 Opening with Special Exchange Rates ..................................................................................................... 16

Chapter 4 Revaluations, Exchange Rate Differences ..................................................................17

Exchange Rate Profits............................................................................................................................... 18 Exchange Rate Losses............................................................................................................................... 18 Accounting Features for Exchange Rate Differences ............................................................................... 18 Closing Exchange Rate ............................................................................................................................. 19 Enter the Exchange Rate Differences ....................................................................................................... 19

Chapter 5 Entering Multi-Currency Operations..........................................................................20

Fields on the Transactions table................................................................................................................ 22 Establishing the Exchange Rate................................................................................................................ 22 Types of Entries Allowed ......................................................................................................................... 23 Exchange Rate to be Used ........................................................................................................................ 23 Entries in Basic Currency ......................................................................................................................... 23 Entering on an Account in a Currency other than Basic Currency ........................................................... 24 Entries between two Accounts in Currency other than Basic Currency ................................................... 24
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Entries between two Different Currencies ................................................................................................ 26 Entering Exchange Rate Differences ........................................................................................................ 27 Entries on Accounts Kept Using Exchange Rates from the time of purchase .......................................... 28

Chapter 7 End of Year Procedures ................................................................................................29

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Currency conversion

Chapter 1

Introduction Every nation has its own currency and to obtain another currency it is necessary to buy it using the appropriate exchange. The price of a currency compared to another is called the exchange rate. To change money means to convert the amounts of one currency to another. The exchange (exchange rate) varies constantly and indicates the rate of conversion. For example, on January 1st 1 Euro (EUR) was equal to 0.94160 US Dollars (USD) 1 US Dollar was equal to 1.06202 Euros 1 EUR was equal to 1.52170 Swiss Francs (CHF) 1 EUR was equal to 107.860 Japanese Yen (JPY)

Variability of Exchanges The purchase/sale of money occurs in a free market. The price (exchange rate) is based on the law of supply and demand. The differences in the exchange value can be more or less important according to the fluctuations of the exchange rate.
Date 01-01 31-03 30-06 30-09 Exchange EUR/USD 0.9416 0.8792 0.8495 0.9098 Exchange value EUR Modified exchange value of USD 1000.00 with respect to 01-01 1062.02 1137.40 75.38 1177.16 115.14 1099.14 37.12

Exchange Basis The exchange refers to the basic currency. There are always two different exchange values between two currencies, according to the currency that is used as the basic currency. For the USD and Euro currency, there are therefore two different exchange rates: If the basic currency of the exchange is EUR then the exchange rate is 0.94160 1 Euro (EUR) corresponds to 0.94160 US Dollars (USD) If the basic currency of the exchange is USD then the exchange rate is 1.06202 1 US Dollar corresponds to 1.06202 Euros

In the current document, the Euro will be regularly used as the basic currency, to which other currencies will be compared.

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Inverse Exchange Having the exchange of EUR/USD at 1.62840, it is possible to find the exchange rate of USD/EUR by dividing 1 by the exchange rate.
Exchange EUR/USD 1.62840 Inverse exchange 1/exchange 0.61409973 Inverse exchange rounded to 6 digits 0.614100

The exchange values calculated with an inverse exchange can turn out to be different from the originals because of the roundings.
Exchange EUR/USD 1.62840 Inverse exchange 0.614100 Exchange value 10000 x original exchange 16284.00 Exchange value 10000 x inverse exchange 16283.99 Difference 0.01

Avoid using inverse exchanges in order to not have differences. For example, for the transition to Euros, it was prohibited to use inverse exchanges.

Multiplier There are currencies that have very large exchanges. Always on January 1st 1 US Dollar = 670,800 Turkish Liras 1 Turkish Lira (TRL) = 0.00000149 US Dollars (USD)

Instead of using so many zeros, it can be said that 1000 Turkish Liras (TRL) = 0.00149 US Dollars (USD) In this case, the multiplier is 1000 instead of 1.

Precision As a rule, an exchange is specified with a precision of at least 6 figures after the decimal. There are, however, cases where it is necessary to use more precision. 1 Turkish Lira (TRL) = 0.00000149 US Dollars (USD)

When the precision is changed and the exchange is rounded in a different way, the amounts also change. The precision with which the exchange is specified is very important.

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Lowest Denomination For coin and paper money, especially, low denominations are used. As a rule the lowest denomination for Swiss francs is five centimes (0.05). When an exchange occurs, for example EUR/CHF: 1 EUR = 1.52170 Swiss Francs
Exchange Actual Rounded to lowest CHF Difference Effective Exchange value denomination exchange in CHF 10.00 1.52170 15.21 15.20 0.01

EUR

1.52

Calculation of Exchange Rates and Values When the Euro is the basic currency The exchange factor for EUR/USD is 0.94160 1 Euro (EUR) is equal to 0.94160 US Dollars (USD). Calculation of the exchange value: Multiply the basic currency amount by the exchange factor: EUR 100 x 0.94160 = USD 94.16

Calculate the basic currency amount: Divide the destination currency by the exchange rate: USD 100 / 0.94160 = EUR 106.20

Calculate the exchange factor: Divide the basic currency amount by the destination currency amount: EUR 94.16 / USD 100 = 0.94160

Exchange Rates for Purchases and Sales Banks carry out the purchase and sale of currencies and maintain a margin of earnings. They apply different exchange rates depending on whether a determined value is being bought or sold. Sale: the bank receives domestic money and gives (sells) foreign money. Purchase: the bank receives (purchases) foreign money and gives domestic money.

Currency exchange and Banknotes exchange (Premium) Currency exchange: exchange for written transactions (from one account to the other). Banknote exchange: exchange for banknotes. Premium: commission for converting a written amount to cash.
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To exchange currency, the banks maintain a lesser margin (the difference between purchase/sale) compared to exchanging banknotes. When a written value is to be transformed (credit on the account) into cash currency, the bank applies a commission, called a premium. Differences when Changing Back to Basic Currency When an amount is exchanged into another currency, it is expected that the reverse exchange will render the same amount as it was originally.
Basic amount Exchange rate 100.00 0.94160 Exchange value 94.16 Return 100.00

However, you do not always come up with the same amount when converting currency back. Because of rounding errors, there can be cases where the same return value cannot be obtained.
Basic amount EUR Exchange rate 328.67 0.94160 328.68 0.94160 328.69 0.94160 Exchange value USD 309.48 309.49 309.49 Return in EUR 328.67 328.69 328.69 Difference in EUR 0.01

The amounts of 328.68 and 328.69 have the same exchange value of 309.49. Changing back the amount of 309.49, 328.69 is obtained. Therefore there is no USD amount which, when changed back at the 0.94160 rate, returns the amount of 328.68.

Differences of Totals through Splitting The total exchange value of the components of an amount does not always give the same exchange value as the overall amount. In this example, the amount of 2.16 EUR gives an exchange value in USD of 2.03. By splitting the amount and adding the two exchange values, 2.04 can be obtained.
Amount EUR Exchange rate 2.16 0.9416 Exchange value USD 2.03

Total Difference

1.08 1.08 2.16

0.9416 0.9416

1.02 1.02 2.04 0.01

These mathematic differences cannot be eliminated if they are not recorded properly.

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Exchange Rates and Accounting Problems

Chapter 2

Multi-currency Accounting One talks about multi-currency accounting or multi-value accounting when accounts in different currencies are kept. It is necessary to have multi-currency accounting when a company has bank, cash, and debtors accounts in more than one currency. Even if just one account is in a foreign currency it is necessary to administer a multi-currency accounting.

Basic Currency The amounts referring to different currencies cannot be totaled directly. It is necessary to have a basic currency to refer to and to use for the totals. The main point of accounting is that the totals of the debit balances must correspond to the totals of the credit balances. To verify that the accounting is balanced, there must be a single currency with which to do the totals. If there are different currencies, the basic currency must be indicated before anything else. Once the basic currency has been chosen and some operations have been executed, the basic currency can no longer be changed. To change the basic currency, the accounting must be closed and another opened with a different basic currency. The basic currency is also used to establish the Balance Sheet and to calculate the profit or loss of the operation. Every Amount has an Exchange Value in Basic Currency To be able to add the totals and verify that the operations balance, it is necessary to have the exchange value in basic currency for every transaction. In this way you can check that the total of the debit entries is the same as the total of the credit ones. If the basic currency is Euros and there are transactions in US Dollars, there needs to be an exchange value in Euros for every transaction in US Dollars. All the Euro amounts will be totaled to verify that the accounting balances. Account Currency Each account has its own currency symbol which indicates in which currency the account will be administered. You must therefore indicate what the currency of the account will be. Each account will then have its own balance expressed in its own currency. Only entries in this currency will be permitted on this account. If the account is in Euro, then there can only be Euro entries on this account; if the account is in USD, then there can only be entries in

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the specified USD currency on this account. When you have to administer entries in YEN, then you have to have an account whose symbol is the YEN.

Account Balance in Basic Currency For each account, alongside the balance in the accounts own currency, the balance in basic currency will also be kept, in order to calculate the balance sheet in basic currency. The account card for the USD bank account has to correspond exactly to the bank statement as far as the USD amounts are concerned. The value in basic currency will always be specified for each accounting entry. If the account is in USD, in the entries there will be, beyond the amounts in USD, also its value in EUR. The EUR balance will be given by the sum of all the entries expressed in EUR. The actual balance in basic currency will depend on the exchange rate factors used to calculate the exchange value of each, single entry to EUR. If on a given day you take the actual balance in USD and convert it to EUR at the daily exchange rate, you will get an exchange value that differs from the balance of the account in basic currency. This difference is due to the fact that the exchange rate used for entries on a daily basis is different from the actual daily exchange rate. Thus there is a difference between the actual value at the daily exchange rate and the accounting balance in basic currency. This accounting difference is called the exchange rate difference. The difference between the balance in basic currency and the calculated value has to be registered, when the accounting is closed, as an exchange rate profit or loss.

Balances in another Currency (Currency2) All the accounting reports will be calculated in basic currency. If you take the basic currency values and change them to another currency, you will get the balance in another currency. The program has a Currency2 column where all the values are automatically entered and presented in the currency specified as Currency2. The logic for the conversion of the amounts is the following: If Currency2 is the same as the account or operation currency, then the original value will be used. If the account is in USD and Currency2 is USD, the USD amount will be used. In all other cases the basic currency amount will be used and changed into Currency2. The daily exchange rate is used. Even for past entries, the exchange value in Currency2 will be expressed on the basis of the most recent exchange rate, and not on the historical one used on the day of the entry,

You need to pay attention to the fact that a balance converted to another currency will show small differences in the totals. Often the converted value of a total is not equal to the sum of split exchange values, as can be seen from the following example:

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Basic currency EUR Cash Bank Total Assets Personal capital Total Liabilities 1.08 1.08 2.16 2.16 2.16

Currency 2 USD 1.02 1.02 2.04 2.03 2.03

In the basic currency, total assets are equal to total liabilities. It is permitted to present a Balance Sheet that contains differences only if they are understandable and if it is indicated that they were due to calculations from another currency.
Account Table, Currency2 View

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Chart of Accounts and Opening Balances

Chapter 3

Assets and liabilities The accounts of the Balance Sheet (assets and liabilities) can be in any kind of currency.
Accounts table

In the Chart of Accounts, the currency of the account, defined in the Foreign Exchange Rate table, has to be specified for every account,

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Expenses and Income The accounts of the Profit and Loss Statement (Expense and Income) have to be specified in basic currency.

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Foreign Exchange Rate table

Foreign Exchange Rate table in Multi-currency accounting

Before defining the codes for the accounts in the Currency column of the Account table, the parameters of the currencies need to be specified in the Foreign Exchange Rate table. Data This is the date when the exchange rate was used. The program only uses exchange rates with no date. The date column is only used in the exchange rate history. Warning: if a date is entered in the Foreign Exchange Rate table, the exchange rate will not be used by the program, and an error message will be appear in the Transactions table declaring: currency symbol does not exist. Currency Ref. This is the currency that serves as the basis for the change (the Euro in our example.) Currency This is the destination currency, the one into which the value of the Currency Ref. will be converted. Text A text to specify exactly which foreign currency is being dealt with. Fixed True or false. If there is a fixed exchange rate, enter Yes in this column. In this case, the exchange rate used will not be the opening one, but the rate specified in the Exchange Rate column. Mult. The multiplier is usually 1, 100 or 1000 and is used to obtain the effective exchange rate. The multiplier is used for currencies which have a very low unit value in order to avoid having to insert exchange rates with many zeros. The multiplier can also be negative (-1). In this case, the program will use an inverted exchange rate or else it will act as if the currencies inserted in the Currency and Reference Currency columns had actually been inverted (exchange rate = 1/exchange rate). Warning: do not alter the multiplier once there are already transactions in the same currency. The program will signal a transaction error due to erroneous exchange rates. Exchange rate This column shows the actual exchange rate for the currency with respect to the reference currency.

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Opening Exchange rate This is the exchange rate at the moment the accounting is opened. It is used to convert the opening amount of the currency into the opening amount of the accountings basic currency. Insert it only once when the exchange rates are input because the program will then pick it up automatically at the beginning of a new year. Minimum This column shows the minimum exchange rate accepted. If a lesser exchange rate is used during the entry, there will be a warning. Maximum This column shows the maximum exchange rate accepted. If a greater exchange rate is used during the entry, there will be a warning. Decimal Points This column shows the number of decimal points to be used when rounding the amounts in currency2.

Define the Opening Exchange Rates On the Exchange Rate table, you need to input the opening exchange rate for each currency. The opening exchange rate is the same as the closing one for the previous year. The opening exchange rate should not change during the year. If it gets changed, exchange rate differences in the opening balances could result. When the opening exchange rate is altered, the exchange values in basic currency in the opening balances are not automatically recalculated. If there are opening balances in other currencies and the opening exchange rates are altered, it becomes necessary to use the recheck/recalculate the accounting command. In this way the opening balances are converted to basic currency using the new exchange rate.

Balancing the Balance Sheet (in Basic Currency) At the opening, the exchange value in basic currency of the total assets should correspond to the total liabilities (in negative). Thus the sum of assets and liabilities should amount to zero. If the total assets does not correspond to the total liabilities, then the accounting does not balance and is therefore not correct. A difference in opening balances can be caused by various causes: An amount has been incorrectly input Credit balances have not been input in negative Opening exchange rates have not been correctly indicated Exchange rate differences have not been registered at the closing of the previous year. There is a rounding difference due to a different way of calculating the exchange value.

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Totals table: Control of the Balance

Rounding and Opening Differences When bringing forward data using software packages with different rounding methods, it can happen that there are minimum (0.01) differences between assets and liabilities. If the exchange rate differences were not registered at the end of the previous year, then you will have to do so at the beginning of the new. You will then find yourself with a difference between the opening balances and those for the closing. Hypothetically, if the previous year has already been closed, then nothing else can be done but to register the differences on the Profit & Loss Statement for the current year. The first thing to do is to add a transitory account to the balance. This account, in basic currency, will have the difference between total assets and liabilities as its balance. As the first entry of the year, an operation is input that carries this initial difference to the Profit & Loss Statement. The balance of the transitory account will then be put to zero, using the exchange rate differences account as the entry on the other side. Then the opening balance will balance correctly.

Investments valued at the exchange rate of the time of purchase Certain investments (shares, real estate abroad) are valued using the exchange rate of the time of purchase (historical exchange) and not the current one. The exchange rate profit and loss is not accounted for until it is actually realized. You must therefore make certain these accounts do not get valued using the current exchange rate. In order to input a fixed, historical exchange, you need to create a supplementary currency on the account table (e.g. USD1) with a fixed exchange rate. This currency will then only be used for this account with a fixed rate.

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If you have to make a transfer from the USD account to the USD1 account, you proceed exactly as if you were working with two different currencies. For this reason you will have to use a two-line entry.

Opening with Special Exchange Rates Inputting the opening balances in the opening column, foreign currency amounts will be converted to basic currency at the opening exchange rate. If this system proves not to be flexible enough (you need various special rates or there are rounding differences) the opening can be done manually by making normal entries, indicating the amounts and the exchange rates you want for each account. In this case, the opening column of the Accounts table will be left blank.

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Revaluations, Exchange Rate Differences

Exchange rates vary all the time and therefore also the exchange value to basic currency varies. Between one period and another, there will inevitably be exchange rate differences. Exchange rate differences are not accounting errors but simple adjustments of the values made necessary in order to keep the accounting figures in step with normal fluctuations. As you open the accounting, the figures in the balance column are equal to those present in the opening column. When there are entries, these will update the figures in the balance column. The calculated balance column contains the exchange value to basic currency for the account balance, at the daily exchange (on the exchange rate table). The difference between the balance in basic currency and the calculated balance is the exchange rate difference.
Currency at opening Exchange Basic Currency Calculated Bavalue at Balance EUR lance at 30.03.01 opening EUR EUR 0.9416 EUR USD EUR 93.80 100.00 1'000.00 93.80 106.20 1'000.00 1'200.00 0.9416 93.80 106.20 1'000.00 1'200.00 0.8792 93.80 113.74 1'000.00 1'207.54 Exchange rate difference

Chapter 4

Exchange rate Cash Bank Real estate Total Assets

7.54

Loan USD Personal capital EUR Total Liabilities

-500.00 -669.00

-531.01 -668.99 -1'200.00

-531.01 -668.99 -1'200.00

-568.70 -668.99 -1'237.69

-37.69

Loss

-30.15

-30.15

At 30th March the EUR/USD exchange rate is different from the one at the beginning of the year. In the above example there were no accounting entries during the three-month period. The situation, from an accounting point of view, has not changed since the beginning of the year. Despite this the total of the updated balance, using the rate at the end of March, is different when compared to the beginning of the year. The credit bank balance and the loan in USD have a different value in EUR. There are therefore consequences for the accounting even though there have been no entries. In the above example, you will notice that the Euro is now worth less against the dollar compared to the beginning of the year. The dollar is therefore worth more against the Euro. The exchange value of the balance on the account in USD is greater than it was at the beginning of the year. You have a greater estate and therefore a profit on the exchange rate. On the debit side there is a USD 500.00 loan. Now the exchange value in EUR is greater compared to the value input at the beginning of the year. The value of the loan has increased and brings about a loss due to the exchange rate difference.

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In the following example we shall use the hypothesis that there has been the opposite development. We imagine that the Euro has increased in value and is therefore worth more against the USD. The exchange value in EUR of an amount in dollars is less than the one at the beginning of the year.
Currency at opening Exchange Calculated balance Exchange rate value at at 30.03.01 EUR difference opening (hypothetical) EUR 0.9416 0.9800 93.80 106.20 1'000.00 1'200.00 93.80 102.04 1'000.00 1'195.84

Exchange rate Cash Bank Real estate Total Assets EUR USD EUR 93.80 100.00 1'000.00

-4.16

Loan Personal capital Totale Liabilities

USD EUR

-500.00 -669.00

-531.01 -668.99 -1'200.00

-510.30 -668.99 -1'179.29

20.71

Profit

16.55

16.55

As a consequence of an increase in the Euro/dollar exchange rate, you have a USD bank deposit with an exchange value in EUR which is less than at the beginning of the year. The total worth has diminished and there is therefore a loss. The USD loan has a lower exchange value in EUR. A lesser liability is an advantage for the company and there is thus an exchange rate profit. Exchange Rate Profits You have an exchange rate profit when: - The exchange value of your assets increases (increase of the investments) - The exchange value of the liabilities decreases (decrease of the loans). Exchange Rate Losses You have an exchange rate loss when: - The exchange value of your assets decreases (decrease of the investments) - The exchange value of the liabilities increases (increase of the loans).

Accounting Features for Exchange Rate Differences Exchange rates can evolve in different ways. Often they rise, only to fall again. The principle rule for accounting is that the figures written on the Balance Sheet must be true ones. When you present your Balance Sheet, the exchange values of foreign currency accounts must be made at the exchange rate on the day of presentation. The exchange rate difference is calculated as if you had to definitively convert the amount to basic currency. In reality there is no definitive conversion so you are only dealing with a correction to the accounting.

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Closing Exchange Rate At the end of each year it is necessary to prepare the complete Balance Sheet. The exchange rates thus have to be updated with the closing exchange rates. It is also necessary to enter the exchange rate differences once and for all; if these are not entered, then there will be differences in the opening balances. Enter the Exchange Rate Differences
Currency balance Exchange Bank Exchange rate difference Banque USD EUR 100.00 Accounting Calculated balance Exchange balance at 30.03.01 EUR rate EUR (hypothetical) difference 0.9800 106.20 -4.16 102.04 -4.16

USD

100.00

102.04

102.04

0.00

As can be seen from the above example, the bank balance is USD 100.00. For the accounting it has been valued at 106.20 EUR. Todays actual exchange, though, is only EUR 102.04. There is a difference of EUR 4.16 EUR in basic currency. The entry must therefore decrease the EUR amount. You proceed with a transaction that debits the bank account and credits the exchange rate loss account by EUR 4.16. As you can see, the actual bank account balance of USD 100.00 has not been altered. The entry only alters the basic currency balance. When entering the exchange rate difference, you need to be sure that the exchange value in basic currency corresponds to the actual exchange value, calculated at either the daily exchange rate or the closing one. The figures in the account currency must not be altered. You must therefore proceed to make an entry that only alters the basic currency balance on the specific account. As the account on the other side you will have the exchange rate profit or loss account.

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Entering Multi-Currency Operations

Before starting to administer a multicurrency accounting, you must: Select the multi-currency option as the type of your choice (File New Multi-currency accounting) Insert the code for the basic currency in the File and accounting properties (Basic data)

Chapter 5

Insert the accounts in foreign currency and the exchange rate profit and loss accounts in the Chart of Accounts Indicate the exchange rates in the Foreign Exchange Rate table Indicate in the File and accounting properties (File menu), Foreign Currency tab, the exchange rate profit and loss accounts. It is also possible to indicate one and the same account.

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Before entering foreign currency transactions, the exchange rate in the Foreign Exchange Rate table needs to be updated.

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Fields on the Transactions table

Date The date of the operation. Doc The number of the document. Description The description of the transaction. Debit A/C The account in which the amount is recorded in debit. Credit A/C The account in which the amount is recorded in credit. Currency Amount The amount of the transaction (any currency). Currency The code for the currency. Exchange rate When dealing with a transaction that is not in basic currency, this is the exchange rate between the foreign and the basic currency. The exchange rate is automatically recalled from the Foreign Exchange Rate table. Amount EUR The amount expressed in EUR. When dealing with a transaction that is not in basic currency, this is the amount that has been converted from the foreign to the basic currency. This conversion is automatic according to the exchange rate. Establishing the Exchange Rate Before entering a transaction in foreign currency, the Foreign Exchange Rate table needs to be updated (Exchange rates column) with the daily exchange rate. In the Transactions table, the program calculates the exchange values according to the inserted exchange rate, and takes the eventual exchange rates profits or losses into account. The exchange rate difference depends on the exchange rate inserted in the Foreign Exchange Rate table. Every day there is a different exchange rate and thus also the values of the Balance Sheet change on a daily basis. Except in special cases, the Foreign Exchange Rate table doesnt need to be updated every day. The update of the exchange rates is done when updated or conclusive reports need to be printed.
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Types of Entries Allowed For each entry there are two accounts (debit account and credit account) and there can be the following direct combinations: Entries between two accounts in basic currency (EUR EUR) Entries between an account in foreign currency and one in basic currency (USD EUR) Entries between two accounts in the same foreign currency (USD USD), but not in basic currency

It is not possible to register a transfer between two accounts in different foreign currencies in a single row when one is not the basic currency (USD YEN). Note: the expenses and the income need to be entered with the daily exchange rate and thus have to be in basic currency. Exchange Rate to be Used For certain operations you need to keep in mind that it might be necessary to use a predefined exchange rate (banking transactions). In these cases you need to use the indicated rate and the program will automatically calculate the exchange value in basic currency. Banks specify exchange rates with few figures after the decimal point and often round the amounts. On these occasions you input the exchange value in basic currency and leave it to the program to work out the actual exchange rate. The exchange rate used can influence the calculation of VAT. If you invoice goods to a customer from your country in USD, the calculation of VAT will be made on the EUR exchange value. The exchange rate used will determine the amount of VAT due. National VAT legislation will tell you which exchange rates to use under such circumstances. Other factors can determine the exchange rate to be used. For some kinds of transactions, loans and shares, the exchange rate of the time of purchase (historical one) is often used, independent from exchange rate fluctuations.

Entries in Basic Currency This is a simple entry. The amount in foreign currency and basic currency are one and the same.

Both the 1000 account and the 1020 account are in basic currency EUR.

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Entering on an Account in a Currency other than Basic Currency You can only make entries in the account currency on any single account. The entry currency must be the same as that of the account. The amount must be expressed in the account currency. Example: When you enter on a USD account, the currency used for the entry must be USD.

On the 1000 account, the basic currency amount of 113.74 EUR is being entered on the debit side (Basic Currency view)

On the 1025 account, the foreign currency amount of 100.00 USD is being entered on the credit side (Currency view).

Entries between two Accounts in Currency other than Basic Currency On an account you can only enter in the currency of that account, thus the amount has to be expressed in the account currency. If you enter on a USD account, the entry currency has to be USD.

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In the example, there are two USD accounts:

On the 1030 account, the foreign currency amount of 1000.00 USD is being entered on the debit side (Currency view).

On the 1025 account, the foreign currency amount of 1000.00 USD is being entered on the credit side (Currency view).

In the Basic currency view, we can find the amounts, automatically converted by the program according to the exchange rate inserted in the Foreign Exchange Rate table.

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On the 1030 account, the basic currency amount of 1137.40 EUR is being entered on the debit side.

On the 1025 account, the basic currency amount of 1137.40 EUR is being entered on the credit side.

Entries between two Different Currencies When there is an operation between two different currencies, USD and CHF for example, it is not possible to make the entry on a single entry row. You will have to use two entry rows and operate if you were entering two different operations.

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On the 1040 account, the foreign currency amount of 1000.00 CHF is being entered on the debit side (Currency view)

On the 1025 account, the foreign currency amount of 570.91 USD is being entered on the credit side (Currency view).

Entering Exchange Rate Differences The program calculates the exchange rate differences automatically. When you need to enter the exchange rate differences, proceed as follows: Update the Foreign Exchange Rate table with the closing exchange rates or those of the end of the period.

Execute the command Create transaction for exchange rate variation (Account2 menu).

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Automatic entry of exchange rate differences

Note: The automatically created entries of the exchange rate differences can be cancelled or altered just like any other entry. Entries on Accounts valued with the Exchange Rate of the time of purchase When the positions, valued with exchange rates of the time of purchase (historical ones) are increased or decreased, you have to calculate the exchange of the exchange rate table, taking into account the development of the amounts being brought forward.
USD amount Exchange EUR Total USD Total EUR Historical exchange Exchange value 100'000.00 0.9416 106'202.00 100'000.00 106'202.00 0.9416 50'000.00 0.8792 56'870.00 150'000.00 163'072.00 0.919839

Acquisition of shares Increase of shares

Copyright 1989/2006 Banana.ch SA

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End of Year Procedures

At the end of the year you have to proceed in the following way: Input any entries necessary for the transfer to the new year. (Transitory, amortisation, warehouse, etc.) Update the Exchange rate table (Exchange rate column) with the closing exchange rates, or those for the end of the period Execute the command Create transaction for exchange rate variation Check if there are no differences on the Totals table Correct any eventual differences (opening balances or entry differences ) Correct any eventual errors the program signals. Execute this operation until all the errors have been eliminated. Recalculate the accounting.

Chapter 7

To create the new accounting year, execute the Create New Year (Account2 menu) command. All the data are automatically recalled with the opening balances of the Balance Sheet.

The information given in this document is subject to change without prior notification and represents no obligation on the part of Banana.ch SA. All rights are reserved. No part of this document may be reproduced, memorized in a filing system, or transmitted by any other form or means, electronic, mechanical, photocopy, recording or other, without prior authorization from Banana.ch SA. The use of this document is allowed only for the owner of a valid users licence of the Banana Accounting program (complete version). Copyright Banana.ch SA, Lugano (Switzerland) 2006. All rights reserved.

Copyright 1989/2006 Banana.ch SA

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