How Cross-Currency Receipts Are Processed

Use cross-currency receipt applications to process payments that customers make in a currency different from the currency of the open debit item. You can apply cross-currency receipts to invoices, debit memos, and chargebacks.

When you apply a cross-currency receipt, Receivables calculates both the open balance on the transaction (if any) and the foreign exchange gain or loss for the application.

You can apply receipts to transactions using any currency defined in General Ledger.

Settings That Affect Cross-Currency Receipts

These settings affect cross-currency receipt applications:

Realized Gains and Realized Losses Accounts: Define a realized gains account and a realized losses account at the Receivables system option level to account for the conversion rate gain or loss in the ledger currency resulting from a cross-currency receipt application.
Cross-Currency Rate Type: Enter the default conversion rate type at the Receivables system option level to use when the receipt and transaction currency are different and the two currencies don't have a fixed-rate relationship. If the receipt and transaction have a fixed-rate relationship, then Receivables uses the conversion rate defined between these currencies.

Receivables uses this rate type to calculate the allocated receipt amount when you enter the amount applied, and vice versa. If this Receivables system option isn't defined, then you must manually enter both values.

Lockbox also uses this rate type to apply cross-currency receipts if the process can't calculate the rate to use.
Cross-Currency Rounding Account: Define a cross-currency rounding account at the Receivables system options level to record any rounding error amounts created during a cross-currency receipt application for currencies that have a fixed-rate relationship.
Entered Currency Balancing Account: Define an entered currency balancing account in General Ledger for journal entries created by cross-currency receipt applications. You define the entered currency balancing account in the Journal Processing Balancing section of the Specify Ledger Options page for the applicable ledger.

For each cross-currency receipt application, General Ledger creates an entry in the entered currency balancing account so that each journal entry balances in the entered currency.

How Cross-Currency Receipts Are Calculated

When applying cross-currency receipts, your customer needs to provide the following remittance information:

Which transactions to apply the receipt to.
If the receipt is a partial payment, how much of each transaction is to be settled.
If applicable, conversion rate information, which is either:
- Conversion rate to use to convert to the ledger currency.
- If you're manually entering allocated receipt amounts, how much of the receipt to allocate to a transaction.

In the Create Receipt or Manage Receipt page:

Enter the amount to apply to a transaction in the Applied Amount field. If a conversion rate exists between the receipt currency and the transaction currency, Receivables populates the Cross Currency Rate field and calculates the allocated receipt amount.
If a conversion rate doesn't exist between the receipt currency and the transaction currency, then either enter the rate to use to convert the transaction amount to the receipt amount in the Cross Currency Rate field, or enter the amount of the receipt to allocate to the transaction in the Allocated Receipt Amount field.

Receivables performs these calculations:

Converts the amount applied to the ledger currency and displays the result in the Amount Applied Base field.
Updates the balance due in both the transaction currency (Balance Due field) and the ledger currency (Balance Due Base field).
Calculates the cross-currency conversion:
- If necessary, Receivables uses the receipt date as the conversion date and the Receivables system option cross-currency rate type to calculate the rate.
- If you enter a conversion rate in the Cross Currency Rate field, Receivables calculates the allocated receipt amount.
- If you enter the allocated receipt amount, Receivables calculates the cross-currency rate.
If applicable, calculates the discounts in the transaction currency. If there are transactions in multiple currencies, Receivables can't display the total discount in a single currency. You can only view the discount for each application separately.
If the currencies have a fixed-rate relationship, calculates the rounding error amount created by the cross-currency receipt application.
Calculates the foreign currency exchange gain or loss:
- Receivables determines the transaction amount and the receipt amount in the ledger currency.
- Receivables calculates the foreign currency exchange gain or loss in the ledger currency using this formula:
```
Receipt Amount (as of the receipt date) - Transaction Amount (as of the transaction date) = Foreign Exchange Gain or Loss
```
  This formula is also expressed as:
```
Allocated Receipt Amount Base - Amount Applied Base = Foreign Exchange Gain or Loss
```
- If a discount has a gain or loss amount, the amount is included in the realized gain and loss calculation for the item.

Receivables creates multicurrency journal entries each time you apply a receipt in one currency to a transaction in a different currency. When you post these multicurrency journal entries, General Ledger:

Separates the entries by currency before balancing them.
Creates an entry in the entered currency balancing account to balance each journal entry.