Mehran Hoodeh, Multi-Currency Accounting
 
  For the companies whose business involve different currencies, it's always a matter on how to keep the exchange rates when recording a transaction in their softwares. Many softwares do not support figures other than a Default Currency which is usually the National Currency. For this reason, many accountants need to have an extra book-keeping (for example in EXCEL) to retain the exchange rates when recording a transaction which is in a different currency than the default one.

Imagine your default currency is in EURO and your company sells a product or service to another company who asks you for an invoice in USD. On the other hand, when a partial payment is done by that company it would be in USD and you need to keep the remaining balance, too, in USD.
But, note that all recordings in your software must be in EURO because it is your company's Default Currency. So, in a normal way of accounting, you need to manually exchange the USD Debit and the Credit amounts for that transaction into EURO and save it in your software, while to keep the remaining balance with that company you need to have an EXCEL-sheet-like file to write the Debit (the invoice amount) and the Credits (the payment) in original USD values to know how much of the payment is still remaining. This is in fact a parallel accounting that, in long term, would cause you a lot of issues.

Now imagine that your company has many clients each of which having different currencies who always ask you for their Statement in their own currency, not yours.

Another problem rises out of this issue if the exchange rates are not always fixed to a value and have fluctuations which brings you gains and losses, too, and should be translated before closing a Financial (Fiscal) Year. In this case, if you keep the exchange rates in a different book other than your Accounting Software, you will need to do the translation calculations on your own.

While I was designing Fractal Accounting software (in 2009) for the chain of companies I work in, I faced this problem that our accountants had with their previous softwares which didn't support Multi-Currency Accounting. So, I tried to implement an efficient way of keeping both books at the same time in the software. I finally solved this problem by a simple approach; keeping each line-item of the Vouchers in the following format:


 
  Mehran Hoodeh, Multi-Currency Accounting  
     
     
     
     
  A sample Sales and its settlements  
 
 
 
Transaction Issued Voucher
On
Invoice 1001
(in USD)
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 267 12010 03050 Invoice 1001 100,000.00 USD 3.675 367,500.00  
2 267 72020 07050 Invoice 1001 367,500.00 AED 1 367,500.00  
                Total 367,500.00 367,500.00  
On
Invoice 1002
(in EURO)
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 268 12010 03050 Invoice 1002 75,000.00 EUR 4.075 305,625.00  
2 268 72020 07051 Invoice 1002 305,625.00 AED 1 305,625.00  
                Total 305,625.00 305,625.00  
On Receipt 1
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 269 11012 01002 Receipt 54587445 110,250.00 AED 1 110,250.00  
2 269 12010 03050 Payment 1/3 again Invoice 1001 30,000.00 USD 3.675 110,250.00  
                Total 110,250.00 110,250.00  
On Receipt 2
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 270 11012 01002 Receipt 5687454 220,500.00 AED 1 220,500.00  
2 270 12010 03050 Payment 2/3 again Invoice 1001 60,000.00 USD 3.675 220,500.00  
                Total 220,500.00 220,500.00  
On Receipt 3
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 271 11012 01002 Receipt 5784524 163,000.00 AED 1 163,000.00  
2 271 12010 03050 Payment 1/2 against Invoice 1002 40,000.00 EUR 4.075 163,000.00  
                Total 163,000.00 163,000.00  
Now,
on getting
Statement
of Accounts
Fractal will report the statement for this client with the balances
in all currencies which this client has worked with.
 
Remaining Balance in USD  10,000
Remaining Balance in EUR  35,000
Remaining Balance in AED  179,375
On Receipt 4
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 272 11012 01002 Receipt 6055421 36,750.00 AED 1 36,750.00  
2 272 12010 03050 Payment 3/3 against Invoice 1001 10,000.00 USD 3.675 36,750.00  
                Total 36,750.00 36,750.00  
On Receipt 5
  VCR
No.
GL
Account
Sub
Account
Entry Description Debit
MC
Credit
MC
CRCY Rate Debit
AED
Credit
AED
VU
1 273 11012 01002 Receipt 6255241 142,625.00 AED 1 142,625.00  
2 273 12010 03050 Payment 2/2 against Invoice 1002 35,000.00 EUR 4.075 142,625.00  
                Total 142,625.00 142,625.00