The QuickBooks Specialists
One of the best online sources we’ve found for historical foreign exchange rates is OANDA’s Historical Exchange Rates. Their data stretches back to 1990, and access is free.
They include multiple rates for each currency and can return data in HTML, ASCII, or CSV formats. A CSV format can be easily imported into Microsoft Excel for further analysis.
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Recording a gain or loss on funds transferred to a foreign bank account is accomplished by the Company->Manage Currency->Home Currency Adjustment menu selection.
First, enter the Date for the currency adjustment and choose the Currency whose value you want to update. Click the Calculate Adjustment button to locate those balances potentially impacted by the changed exchange rate. Enter the updated exchange rate.
In this example, we started with an exchange rate of 1 British pound (GBP) = 1.705 US Dollars (USD). We’ll record a new exchange rate of 1 GBP = 1.905 USD. Click the Calculate Adjustment button a second time to calculate the exchange-related gain or loss based on the updated exchange rate. Select the balances to adjust based on the new exchange rate by placing a check mark to the left of each balance. If you need to better describe the adjustment, enter a Memo. Click the Save & Close or Save & New button to record the adjustment.
QuickBooks will post a General Journal entry to the Exchange Gain or Loss account in the amount of the adjustment.
See our related article for more information on transferring funds to a foreign bank account.
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QuickBooks 2009 and Enterprise Solutions 9.0 (and later) support transactions in multiple currencies. Each account, customer, and vendor has an associated currency. Multi-currency support in QB does not extend to employees.
Therefore, when you set up a bank account, you’ll specify the Currency used for that account, as shown below.
In a company file (.qbw) that has already been set up to use multiple currencies, set up each bank account with the single currency in which the account is maintained.
To transfer funds from 1 bank account in 1 currency to another bank account in another currency, there are 3 basic methods:
See our related article for more information on recording gains and losses on funds transferred to a foreign bank account.
Method 1 – Create a Vendor for the Foreign Bank and Write a Check
Create a Vendor for the bank account that will receive funds, and be sure to include the currency in which the account is maintained.
Next, simply write a check from the account denominated in 1 currency (the Bank Account in USD below) to the Vendor whose records are maintained in the currency of the account receiving the funds (British Bank below). On the Expenses tab, set the Account to the bank account receiving the funds.
Method 2 – Use the Transfer Funds Function
First, make sure you have already created both bank accounts – the bank account that is the source of funds and the bank account that will be the recipient of funds.
Open your General Ledger Chart of Accounts by clicking on the menu selection Lists->Chart of Accounts or using the keyboard shortcut Ctrl + A. Click once on the bank account that will be the source of funds. Be sure to click just once to select the source account, because double clicking will open a register for that account. If you don’t select the correct account, you’ll have a chance to review and correct the account selection before making the transfer.
With the source account selected, right click on the source account to invoke the context menu. Chose Transfer Funds from the context menu.
The Transfer Funds Between Accounts window will allow you to transfer funds between 2 bank accounts. Verify that the source bank account – the one providing the funds – is selected in the Transfer Funds From pulldown and that the recipient bank account – the one receiving the funds – is selected in the Transfer Funds To pulldown. Until you select a recipient account in a currency other than your home currency, the Transfer Currency will be set to your home currency, and you won’t be able to change it. Once you select a recipient account in a foreign currency, you can record an amount to transfer either in that foreign currency or your home currency – QuickBooks will automatically do the conversion for you. Unfortunately, you can’t transfer funds between 2 accounts, both of which are maintained in foreign currencies.
Enter a Memo for the transfer and click either Save & Close or Save & New. According to Intuit as discussed in this Intuit knowledge base article, because of a product limitation in QuickBooks the Memo for the recipient account is not set to the value entered on the Transfer Funds Between Accounts window when viewed on reports such as the Custom Transaction Detail Report. However, our own tests on QuickBooks 2009 don’t confirm this behavior. QuickBooks correctly sets the Memo field on both the source and recipient (target) accounts, and the Memo correctly displays on the Custom Transaction Detail Report.
Once the transfer is recorded, it will appear in the registers for both bank accounts as a TRANSFR transaction type. Here’s the register from the foreign bank account after recording the transaction:
It’s always important to remember that QuickBooks will use exchange rates on file in QuickBooks before you record the transfer. If there’s no exchange rate recorded in QuickBooks at all for the 2 currencies involved, the exchange rate will be set to 1:1 unless you manually enter a new Exchange Rate in the Transfer Funds Between Accounts window before recording the transfer. If there is an exchange rate for the 2 currencies involved as of an earlier date, QuickBooks will use that exchange rate unless you manually enter a new one.
The Transfer Funds function is not unique to company files with multi-currency enabled or to transfers exclusively between bank accounts. With or without multi-currency enabled, you can use the Transfer Funds function to transfer funds between any 2 accounts.
One small advantage this second method offers is that it doesn’t require adding a Vendor to transfer funds between accounts, although in many cases you may have other reasons to create a vendor for a bank account, such as recording bank charges.
For those using or planning to use third-party addons for QuickBooks, the Transfer Funds function has an important limitation. Many third-party addons use the Intuit Software Developers Kit (SDK) to access QuickBooks data, and versions of the SDK up to 8.0 do not provide access to transfer transactions. For example, a custom report built from QuickBooks data gathered using the QODBC driver would not have access to transfer transactions, since the QODBC driver itself can’t access those transactions in QuickBooks. If transactions were recorded with this method, a custom report that relied on this information would be incomplete and inaccurate. Of course, if you don’t plan to use any addons or extract data from QuickBooks, this limitation is irrelevant, because the QuickBooks program itself can display and report on transfers.
Method 3 – Use a General Journal Entry
Another direct method is to use a general journal entry to accomplish the transfer. The account receiving funds is debited, and the account providing funds is credited.
When using this method, it’s important to understand an important limitation: the Currency of the general journal entry must be the Currency of the foreign bank account. Likewise, since most exchange rates in QuickBooks are expressed as a conversion from a home currency to a foreign currency, the exchange rate for a general journal entry is the reciprocal (i.e., 1 divided by the normal exchange rate) of the normal exchange rate.
Through QuickBooks 2010 release 5, general journal entries recorded in the home currency would incorrectly record home currency units in the foreign bank account – instead of converted home currency units.
Because of these limitations, this method is only recommended for advanced users exercising care when recording the transfer.
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QuickBooks 2009 and Enterprise Solutions can print checks in currencies other than the US dollar (USD), with a few words of caution. Each time you attempt to print checks in a currency other than the USD, QuickBooks will display the warning screen shown below. To continue with the printing process, you’ll need to click Ok. There’s no obvious way to turn the warning off, so you’ll see it once each time you print checks from a foreign bank account.
Note that the warning says that QuickBooks only supports printing on “US dollar check templates and other currencies may not match” that template. You can simply order checks for your foreign bank accounts that do match the US dollar check template.
If your preprinted check for each foreign bank account matches the US check template, your checks denominated in a foreign currency will print fine. For example, the normal QuickBooks voucher check prints the check amount to the right of the payee with a pre-printed currency symbol ($ for USD) at the left margin of the check amount. For a check in a foreign currency, QuickBooks will print the 3 letter currency abbreviation before this amount; if you want a currency symbol to appear at the left margin of the check amount, you’ll have to order pre-printed checks with the symbol for the currency used by each bank account.
Checks will print using the currency for the bank account from which you make the payment, provided the currency for the bank account is either the same currency as the vendor or your home currency. If your vendor transacts in a foreign currency and you record payments from a foreign bank in that currency, your checks will print in that currency. If USD is your home currency and you issue these payments from a USD bank account, QuickBooks will record the bill payment for the amount converted to USD at the exchange rate entered when paying the bill. But you can’t pay a vendor transacting in EUR with British Pound Sterling (GBP) if your home currency is USD.
Therefore, when paying foreign bills in a foreign currency, be sure to select the correct A/P Account and bank Account on the Pay Bills window. If you don’t select the correct A/P Account, the bill won’t appear in the window; if you don’t select the correct bank Account, you’ll make your payment in your home currency.
If you inadvertently make payment from the wrong bank account, you can easily fix the error by opening the Bill Pmt – Check transaction for that payment and changing the Bank Account.
QuickBooks will prevent you from changing the Bank Account to an account denominated in a currency that doesn’t match the customer/vendor or that isn’t your home currency.
So, if you make sure your check template for your foreign bank matches the US check template and you’re paying foreign vendors in their own foreign currency from a bank account using that same currency – all easy-to-manage considerations, your foreign currency checks will print just fine.
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First, QuickBooks multi-currency support is off by default. It’s a company preference on the Edit->Preferences->Multiple Currencies menu. Once support for this feature is turned on for a particular company file, it can’t be turned off. When you track multiple currencies, you need to specify the home currency, which for US-based businesses is the US dollar. At the end of our review, we’ll see that one impact of tracking multiple currency transactions is that QuickBooks will automatically create an Other Expense account named Exchange Gain or Loss to record unrealized foreign exchange-related gains and losses.
To get oriented, access to multi-currency features are on the Company->Manage Currency menu.
QuickBooks 2009 offers the ability to download the latest exchange rates. As you can see from the Currency List captured after completing the download, exchange rates for only 12 of the most actively traded currencies were available. If you’re using a currency for which exchange rates aren’t readily available, you’ll have to enter that rate manually.
There’s also a Currency Calculator that can calculate the home amount, foreign amount, or exchange rate. The home amount (e. g. US dollars) is the product of the exchange rate and the amount of the foreign currency. The foreign amount is the result of dividing the home amount by the exchange rate. The exchange rate is the result of dividing the foreign amount by the home amount.
Home Currency Adjustment is used at the end of an accounting period to adjust your balance sheet accounts to reflect exchange rates on the balance sheet date. Balance sheet accounts are adjusted up or down by the amount of the unrealized gain or loss and posting the offsetting debit or credit to an Other Expense account. By default, the Other Expense account is named Exchange Gain or Loss. Until a home currency adjustment is recorded, balance sheet accounts represent the value in the home currency at the exchange rates used at the time each transaction was recorded. If the exchange rate has increased, your home currency buys more of the foreign currency, so the home currency adjustment will result in an unrealized gain. Home currency adjustments are calculated based on unrealized gains and losses. For example, for a customer invoice, gains or losses are unrealized until payment is received; after that, they’re realized and a currency adjustment is no longer applicable. QuickBooks 2009 provides reports for both unrealized and realized gains/losses, so we’ll see this in greater detail when we review these reports and the impact of entering a transaction that originated in a foreign currency.
Rounding out the Multiple Currency menu are 2 help tools. There’s a link to a multicurrency overview in the QuickBooks help file. There’s also a link to the Multicurrency Resource Center. Unfortunately, at this writing, this link just opens the QuickBooks integrated web browser and navigates to a general link that doesn’t contain information on using multiple currencies. Since foreign exchange is a new topic for QuickBooks users, hopefully Intuit gets a specific link up soon.
Let’s see how QuickBooks multi-currency accounting affects some typical transactions. Before we can enter transactions in a foreign currency for a customer or a vendor, we have to specify the currency in which all transactions for that customer or vendor will be recorded. If there are no transactions, we can edit an existing customer or vendor; otherwise, we’ll have to create a new record. We’ll start by creating a new customer and specifying that this customer will be accounted for using the €, or Euro. Next, we’ll produce a customer invoice but we’ll change the exchange rate to 1 Euro (€) = 1.5 US dollars.
At this point, because the customer invoice has not been paid, any foreign exchange-related gains or losses are unrealized. So let’s generate the Unrealized Gains & Losses Report by first entering the exchange rates for those currencies for which there are outstanding transactions.
Next, let’s record receipt of the customer’s payment in full. Both the invoice and the payment will be recorded in the same currency, the Euro (€). We’ll change the exchange rate to 1 Euro (€) = 1.25 US dollars to reflect a change in the exchange rate. Because this invoice has been paid, any foreign exchange related gains or losses have now been realized, so they’ll show up on the Realized Gains & Losses Report.
We’ll wrap up our review of this simple multicurrency transaction by looking at the impact on the company’s records. Press the 
Journal button (or alternately, Ctrl Y) while viewing either the customer invoice or payment to see the specific entries QuickBooks made. The Journal for our Invoice transaction shows the debits and credits for that transaction. Next, let’s go back in time to before we entered the customer payment to review the unrealized gain or loss that would be recorded by entering the home currency adjustment described above. That’s the adjustment at the end of an accounting period to reflect exchange rates on the financial statement date rather than the original transaction date.
Let’s start with the Profit & Loss by running the Profit and Loss Standard report from the Reports->Company & Financial menu and pressing the 
collapse button. Here we’ll see the default account Exchange Gain or Loss created by QuickBooks when we enabled multi-currency tracking in our company file.
Finally, let’s review the Balance Sheet. Note that in order to demonstrate another aspect of multi-currency, this balance sheet was prepared as if the customer payment had not been received. It’s also based on recording a home currency adjustment as depicted above, where we changed the exchange rate to 1 Euro (€) = 1.75 US dollars. We’ll see that our customer receivable has been adjusted up by $250 because of the change to the exchange rate between the date we billed the customer and the date we entered the balance sheet. The upward adjustment matches gain reported as an Exchange Gain or Loss. Since our Exchange Gain or Loss account was an Other Expense account, the gain is shown as a negative expense. Once multi-currency tracking is enabled, balance sheet subaccounts will be created automatically for every currency with transactions.
Multi-currency tracking is one of the most powerful new features of QuickBooks 2009. Now it’s time to generate more foreign business!
