When dealing with foreign currency, exchange rate fluctuation will always affect the true value of currency transactions and accounts.
Currency transactions entered into Sage 200 are stored in their currency value in your foreign currency bank, customer and supplier accounts and converted to your base currency when they are posted to your nominal accounts.
When processing dealing with foreign currency transactions, the converted value of your transaction will change because of fluctuations with the exchange rate. Sage 200 has two different ways of dealing with these exchange differences:
- Automatic transaction revaluation - transactions are automatically revalued when they are paid.
- Account revaluation - the latest exchange rate is applied to the balance of foreign currency bank, customer and supplier accounts.
Both of these processes post adjustments to your nominal accounts. You can see these from the Transaction Enquiry screens and workspaces, when you select Alloc/Reval History.
Automatic transaction revaluation
Sage 200 automatically revalues foreign currency invoices when they are part or fully allocated to a payment or receipt. When invoice is allocated, the exchange rate entered on the invoice is compared with the exchange rate entered on the receipt or payment. When there is a difference, the loss or gain is automatically posted to your exchange rate differences nominal account.
On the 1st of June you enter a customer invoice for $1000.00. At that time the exchange rate is 1.5 so the amount posted to your nominal accounts is £666.67.
When the customer pays the invoice on the 1st of July the exchange rate is 1.3. The value posted to your nominal accounts is £796.23.
So although the customer order and the payment were $1000, the difference in the base currency amount due to currency exchange rate fluctuations is £129.56.
Examples of how Sage 200 automatically revalues foreign receipts
In this example a customer places an order on the 1st of June and pays for it fully on the 1st of July.
We will look at:
- How exchange rate fluctuations affect the value of the invoice and payment.
- How Sage 200 calculates the values that are posted to the Nominal Ledger.
- The point in the process that Sage 200 performs the revaluation.
- What postings are made.
You enter the following invoice:
- Invoice amount: $1000.00
- Raised on: 1st June
- Exchange rate: £1 = $1.5
- Invoice value in base currency: £666.67
Remember - postings to your nominal accounts are always in your base currency. Sage 200 converts the dollar value to your base currency using the exchange rate in force at that time and posts the following to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Default Sales Account | £666.67 | |
| Debtors Control Account | £666.67 |
You enter the following payment:
- Payment amount: $1000.00
- Paid on: 1st July
- Exchange rate: £1 = $1.6
- Payment value in base currency: £625.00
Sage 200 converts the payment amount to your base currency using the exchange rate in force at the time the posting is made. Notice how fluctuations in the exchange rate have caused a difference between the value of the $1000 when the invoice was raised and when it was paid.
The following posts are made to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £625.00 | |
| Debtors Control Account | £625.00 |
The allocation
The receipt is worth £41.67 less than the invoice. When the receipt is allocated to the invoice, Sage 200 performs an automatic revaluation and posts the following values to the Nominal Ledger.
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £41.67 | |
| Debtors Control Account | £41.67 |
In this example a customer places an order on the 1st of June and makes two part-payments for the order during the month. We will look at:
- How exchange rate fluctuations affect the value of the invoice and payments.
- How Sage 200 calculates the values that are posted to the Nominal Ledger.
- The points in the process that Sage 200 performs the revaluations.
- What postings are made.
The invoice
- Invoice amount: $1000.00
- Raised on: 1st June
- Exchange rate: £1 = $1.5
- Invoice value in base currency: £666.67
The following double entry posts are made to the nominal ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Default Sales Account | £666.67 | |
| Debtors Control Account | £666.67 |
The first part-payment
- Payment amount: $500.00
- Paid on: 20th June
- Exchange rate: £1 = $1.6
- Payment value in base currency: £312.50
Fluctuations in the exchange rate over the month have caused a difference between the value of the $1000 when the invoice was raised and when the $500 part-payment was received.
Sage 200 converts the payment amount to your base currency using the exchange rate in force at the time the posting is made. The following posts are made to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £312.50 | |
| Debtors Control Account | £312.50 |
The allocation of the first part-payment
When a receipt is part-allocated to an invoice, only the portion of the invoice that is paid is revalued. To calculate the revaluation, the base currency allocated value of the invoice and the receipt are compared. The difference between the values is posted to the exchange differences account.
In this example:
- The invoice value of the $500 (£1 = $1.5) is £333.33.
- The receipt value of the $500 (£1 = $1.6) is £312.50.
- The difference is a loss of £20.83.
The following values post to the nominal ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £20.83 | |
| Debtors Control Account | £20.83 |
Every time a receipt is allocated to the invoice Sage 200 posts the payment amount using the exchange rate in force, and then when the allocation links the payment to its invoice, the system performs the revaluation.
A second part-payment
- Payment amount: $250
- Paid on: 1st July
- Exchange rate: £1 = $1.4
- Payment value in base currency: £178.57
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £178.57 | |
| Debtors Control Account | £178.57 |
The allocation of the second part-payment
You allocate the receipt to the invoice. The revaluation occurs.
In this example:
- The invoice value of the $250 (£1 = $1.5) is £166.67.
- The receipt value of the $250 (£1 = $1.4) is £178.57.
- The difference is a gain of £11.90.
The following values post to the nominal ledger.
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £11.90 | |
| Debtors Control Account | £11.90 |
In this example you place an order on the 1st of June and pay for it fully on the 1st of July.
We will look at:
- How exchange rate fluctuations affect the value of the invoice and payment.
- How Sage 200 calculates the values that are posted to the Nominal Ledger.
- The point in the process that Sage 200 performs the revaluation.
- What postings are made.
The invoice
- Invoice amount: $1000.00
- Raised on: 1st June
- Exchange rate: £1 = $1.5
- Invoice value in base currency: £666.67
Remember - postings to your nominal accounts are always in your base currency. Sage 200 converts the dollar value to your base currency using the exchange rate in force at that time and posts the following to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Default Purchase Account | £666.67 | |
| Creditors Control Account | £666.67 |
The payment
- Payment amount: $1000.00
- Paid on: 1st July
- Exchange rate: £1 = $1.6
- Payment value in base currency: £625.00
Sage 200 converts the payment amount to your base currency using the exchange rate in force at the time the posting is made. Notice how fluctuations in the exchange rate have caused a difference between the value of the $1000 when the invoice was raised and when it was paid.
The following posts are made to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £625.00 | |
| Creditors Control Account | £625.00 |
The allocation
The payment is worth £41.67 less than the invoice. When the payment is allocated to the invoice, Sage 200 performs an automatic revaluation and posts the following values to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £41.67 | |
| Creditors Control Account | £41.67 |
In this example you place an order on the 1st of June and make two part-payments for the order during the month. We will look at:
- How exchange rate fluctuations affect the value of the invoice and payments.
- How Sage 200 calculates the values that are posted to the Nominal Ledger.
- The points in the process that Sage 200 performs the revaluations.
- What postings are made.
The invoice
- Invoice amount: $1000.00
- Raised on: 1st June
- Exchange rate: £1 = $1.5
- Invoice value in base currency: £666.67
The following double entry posts are made to the nominal ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Default Sales Account | £666.67 | |
| Creditors Control Account | £666.67 |
The first part-payment
- Payment amount: $500.00
- Paid on: 20th June
- Exchange rate: £1 = $1.6
- Payment value in base currency: £312.50
Fluctuations in the exchange rate over the month have caused a difference between the value of the $1000 when the invoice was raised and when you made the $500 part-payment.
Sage 200 converts the payment amount to your base currency using the exchange rate in force at the time the posting is made. The following posts are made to the Nominal Ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £312.50 | |
| Creditors Control Account | £312.50 |
The allocation of the first part-payment
When you part-allocate a payment to an invoice, only the portion of the invoice that is paid is revalued. To calculate the revaluation the base currency allocated value of the invoice and the receipt are compared. The difference between the values is posted to the exchange differences account.
In this example:
- The invoice value of the $500 (£1 = $1.5) is £333.33.
- The receipt value of the $500 (£1 = $1.6) is £312.50.
- The difference is a loss of £20.83.
The following values post to the nominal ledger:
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £20.83 | |
| Creditors Control Account | £20.83 |
Every time a receipt is allocated to the invoice Sage 200 posts the payment amount using the exchange rate in force, and then when the allocation links the payment to its invoice, the system performs the revaluation.
A second part-payment
- Payment amount: $250
- Paid on: 1st July
- Exchange rate: £1 = $1.4
- Payment value in base currency: £178.57
| Nominal Account | Debit | Credit |
|---|---|---|
| Bank Account | £178.57 | |
| Creditors Control Account | £178.57 |
The allocation of the second part-payment
You allocate the receipt to the invoice. The revaluation occurs.
In this example:
- The invoice value of the $250 (£1 = $1.5) is £166.67.
- The receipt value of the $250 (£1 = $1.4) is £178.57.
- The difference is a gain of £11.90.
The following values post to the nominal ledger.
| Nominal Account | Debit | Credit |
|---|---|---|
| Exchange Differences Account | £11.90 | |
| Creditors Control Account | £11.90 |
Revaluing accounts
To make sure that the balance of your foreign currency bank, customer and supplier accounts is up to date, you can revalue your accounts. This applies the latest exchange rate to the base currency balance these accounts.
Revaluing bank accounts
Current accounting rules require that the balances of your foreign currency bank accounts are shown on the Balance Sheet at a fixed stated, exchange rate.
When you revalue your bank account, you choose the exchange rate that you want to apply to the current balance of a foreign currency bank account.
Revaluing customer and supplier accounts
This gives you an accurate up-to-date view of the value of your outstanding foreign currency transactions (any unpaid invoices).
When you revalue your foreign accounts you can either:
-
Report on the exchange difference.
This displays the value of each outstanding transaction using the original and the new exchange rate. No amendments are made to the values of transactions. Think of it as a what-if snapshot.
-
Perform a full revaluation.
This also updates the balances of your customer and supplier accounts by posting transactions to your Debtors Control and Exchange Differences nominal accounts.
Single or multiple currency revaluations
If you are revaluing a single foreign currency you can specify the exchange that is to be applied as you perform the revaluation. If you are revaluing more than one currency Sage 200 will use the currencies that are specified on the Currencies & Exchange Rates screen. This applies to both the revaluation report and full customer account revaluation.