How Cross-Currency Payments Are Accounted
Cross-currency payments are payments in a currency different from the currency on the respective invoices. The accounting process records entries for cross-currency payments in both the invoice currency and the payment currency.
How Cross-Currency Payments Are Accounted
You can account for cross-currency payments individually or through the Create Accounting process. The accounting entries for the payment relieve the liability account in the invoice currency with an offset to the cash or cash clearing account in the payment currency.
Example
This table shows the invoice and payment accounting entries for an invoice with the following currency information:
-
Invoice amount and currency: 100 GBP
-
Payment currency: EUR
-
Ledger currency: USD
This table shows the invoice, payment, and cross-currency conversion rates that are in effect.
|
Type of Rate |
From Currency |
To Currency |
Conversion Rate |
|---|---|---|---|
|
Invoice conversion rate |
GBP |
USD |
1.75 |
|
Payment conversion rate |
EUR |
USD |
1.45 |
|
Cross-currency rate |
GBP |
EUR |
1.25 |
This table shows the payment transaction in the payment and ledger currencies.
|
Invoice Amount (GBP) |
Cross-Currency Rate |
Payment Amount (EUR) |
Payment Conversion Rate |
Payment Amount in Ledger Currency (USD) |
|---|---|---|---|---|
|
100 |
1.25 |
125 |
1.45 |
181.25 |
This table shows the resulting accounting entries for both the invoice and payment transactions.
|
Accounting For |
Accounting Class |
Entered Debit |
Entered Credit |
Accounted Debit (USD) |
Accounted Credit (USD) |
|---|---|---|---|---|---|
|
Invoice |
Item expense |
100 GBP |
175.00 |
||
|
Invoice |
Liability |
100 GBP |
175.00 |
||
|
Payment |
Liability |
100 GBP |
175.00 |
||
|
Payment |
Cash Clearing |
125 EUR |
181.25 |
||
|
Payment |
Loss |
0 EUR |
6.25 |
||
|
Payment |
Balance |
125 EUR |
175.00 |
||
|
Payment |
Balance |
100 GBP |
175.00 |