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Apply LCY Payment to FC Invoice afterwards

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Posted on by Samantha73

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We have created a foreign currency AP invoice - In this case EUR 100 with manually changing exchange rate to 2 so LCY amount is 200. Now we create a separate payment journal to vendor in Local currency (without application) on account LCY 200. So the original invoice and payment match in local currency. Now from Vendor ledger entries I cannot see a way to fully reconcile these two transactions. What's happening is on vendor ledger entries apply entries screen, exchange rate defaults to system rate. Is there anyway to net off these two transaction?

apply entries screen

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Samantha,

Lets' review the invoice side first... You create an AP Invoice for a EUR Vendor for 100 Euros and LCY of 200. On your Exchange Rates for Euro you entered a 2 under the Relational Exch. Rate Amount field. Now you are ready to pay this 100 Euro, 200 LCY Invoice. Today is 3/17/21 so the Invoice Exchange Rate from 8/4/20 will not be correct since Exchange Rates change daily. The Payment Exchange Rate will be different and therefore generate an Exchange Rate Gain or (Loss). Also, per GAAP, at the end of each month you should be running the Adjust Exchange Rate to update your Balance Sheet and Income Statement entries. This keeps the true amount of the Foreign Currency Invoice close to what the payment exchange rate could be.

What Exchange Rate have you entered for the date you are trying to pay the invoice? Below is my test in Cronus using your example with the Exchange Rate at Invoice of 2 and a Payment Exchange Rate of 1:

The Exchange Rate table below for EUR shows on 2/1 a Relational Exchange Rate = 2 which is for every 1 Euro = 2 LCY. My payment date is 3/1 and change this to Relational Exchange Rate = 1.

with this entry

On Payment Journal we will pay the Invoice in LCY:

with posting equal too -

I skipped the step to Adjust Exchange Rate at month-end but I normally would do this to close my books to calculate the unrealized FX Gain/(Loss). The above entry, for the Payment Journal, is a Realized FX Gain(Loss) since I am actually making a payment.

Hope this explains what the process is and steps.

Thanks,

Steve

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Samantha73 3,247 on at

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Thanks Steve for taking your time to test this. Our processes are different as in my case we have already created the payment on account rather than a payment to an invoice. So now two entries are sitting on the vendor ledger as open - both totaling to same amount in LCY. And we want to reconcile these two using apply function in vendor ledger.

1. Create Invoice in FC

2. Create Payment on Account in LC

3. Apply entries via vendor ledger ledge

As for the exchange rates, on the AP invoice we manually change the system default. If we had paid this invoice using payment journal then I can see FC gain/loss account coming into play

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Samantha,

I just followed your steps in Cronus. I went to the Vendor Ledger Entries, saw my 2 entries (Invoice and Payment), clicked Process/Apply Entries and Set the Applies-ID on the Invoice line (note that when I clicked Process I was on the Payment record) and then clicked Post Application and it applied the 2 entries and closed the transactions.

Just so you know my Invoice and Payment matched the 100 EUR and 200 LCY. Do you want to see my screen shots?

Thanks,

Steve

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Samantha73 3,247 on at

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I think you have done the payment in EUR as in my screenshot 1 currency is blank for payment (local currency) ..but send me the screenshots so I can check

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Samantha,

Invoice :

Manual Payment on Account:

Now lets' Apply on VLE:

Now Apply

Hope this helps.

Thanks,

Steve

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