20 Setup Alternate Currency Receipt

This chapter contains these topics:

The manual receipt application programs allow you to process receipts in an alternate currency. This means that you can apply receipts to invoices in a currency other than the domestic or foreign currency.

20.1 Setup Requirements for Alternate Currency Receipts

To apply alternate currency receipts to invoices, you must set up the following:

  • Alternate currency clearing account and automatic accounting instruction (AAI)

  • Alternate currency receipt gain accounts and AAIs

  • Alternate currency receipt loss accounts and AAIs

  • Processing options for alternate currency receipts

To calculate the gain or loss amount associated with a foreign-currency receipt, the system calculates the changes in the exchange rate between the invoice exchange rate and the rate used at the time of receipt entry.

When you process alternate currency receipts, there is an additional gain or loss on the transaction that is associated specifically with the alternate currency. The Gain and loss account for alternate receipts and standard gain and loss can be different. The differences are handled by using different sets of AAIs.

The system records the gains and losses for alternate currency receipts separately from standard gains and losses.

20.2 Alternate Currency Receipt Clearing Account and AAI (R7)

To record a receipt in an alternate currency, you must set up an alternate currency clearing account to track the conversion of the receipt amount. The receipt amount is recorded in the alternate currency and must be converted to the currency of the invoice. This clearing account provides an audit trail from the cash account entry in the receipt currency to the offset trade account entry in the invoice currency.

The alternate currency clearing account is assigned to AAI item R7 and must follow these rules:

  • It must be in the same company as the bank account from which the receipt is made.

  • It must be set up with a blank offset field and no currency code value. The system will ignore these values if you set them up.

  • It cannot be a monetary account.

  • It must be company specific. You cannot use company 00000 as a default.

  • It must include a business unit.

Note:

This is different from the accounts payable setup.

20.3 Alternate Currency Receipt Gain/Loss Accounts and AAls (RY/RZ)

To record a gain incurred on an alternate currency receipt, you must set up a gain account. The account stores the gains that are realized when the domestic amount of a receipt is greater than the amount derived by calculating from the alternate currency to the foreign currency to the domestic currency.

The gain account for the alternate currency receipt is assigned to AAI item RY.

To record a loss incurred on an alternate currency receipt, you must set up a loss account for an alternate currency receipt. This account shows the losses realized when the domestic amount of a receipt is less than the amount derived by calculating from the alternate currency to the foreign currency to the domestic currency.

The loss account for the alternate currency receipt is assigned to AAI item RZ.

In Automatic Account Instructions (P00121), set up:

  • RYxxx - Alternate Currency Gain, where xxx represents the alternate currency code (optional)

  • RZxxx - Alternate Currency Loss, where xxx represents the alternate currency code (optional)

AAI items RY and RZ follow the same search sequence.

The system creates alternate currency gains or losses, based on one of the following: (in hierarchical order)

AAI Explanation
RYxxx For a specific company (where xxx is the currency code)
RYxxx For company 00000 (where xxx is the company code)
RYyyyy For a specific company (where yyyy is the G/L offset)
RYyyyy For company 00000 (where yyyy is the G/L offset)
RY For a specific company (with <blank> or no offset)
RY For company 00000 (with <blank> or no offset)

This is the same AAI search sequence that is used for standard gains and losses.

20.4 Processing Options for Alternate Currency Receipts

The processing options for alternate currency receipts in Receipts Entry (P03103) are as follows:

Processing Option Description
Alternate Currency Processing Enter 1 to process receipts in the alternate currency method. Leave this field blank to prohibit alternate currency receipt processing.
Draft Processing If you use alternate currency processing, this field must be left blank.

20.4.1 Processing Options

See Section 42.1, "Receipts Entry (P03103)."

20.5 Purpose of an Alternate Currency Clearing Account

Since the original invoice amount recorded against the receivables trade account is in the domestic or foreign currency, the offset amount must also be in the same currency. To calculate this offset amount, the receipt currency is converted to the domestic or foreign currency and then stored in the clearing account.

The alternate currency clearing account will balance on the domestic side but not on the foreign side. This is because the foreign side contains different currencies, which will never balance.

The entries for an alternate currency receipt are as follows:

Description of image058.gif follows
Description of the illustration image058.gif

The alternate currency clearing account provides the audit trail from the cash account entry in the receipt currency to the trade account entry in the domestic currency.

20.6 How Gains/Losses Are Calculated on Alternate Currency Receipts

Gains and losses are calculated using the exchange rates that are effective on the date of the receipt. For alternate currency receipts, two gains or losses are recorded on two different entries.

One entry is calculated based on the fluctuation of the exchange rates between the transaction currency and the company currency. This gain or loss is the same gain or loss that would have been realized if the receipt was not in an alternate currency.

The other entry is the difference between the following amounts:

  1. The amount calculated by converting the alternate currency receipt to the transaction currency and then converting that to the company currency.

  2. The amount calculated by converting from the alternate currency receipt directly to the company currency (this is the amount that is actually deposited to the bank account).

A gain or loss is recorded if the amount that is actually paid, (2), is greater than or less than the amount calculated by converting the receipt alternate currency to the buyer's currency and then to the company (domestic) currency, (1). Another way of stating this is the alternate currency gain or loss is calculated as the domestic amount applied to the bank minus the domestic receipt amount applied to the invoice. These will usually be small amounts caused by rounding differences.

This gain or loss will use AAI items RY/RZ.