Working of Inter Currency Conversion - Revision history

Steve at 10:34, 25 February 2018

2018-02-25T10:34:14Z

← Older revision		Revision as of 10:34, 25 February 2018
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	however you can happily post one currency into the bank and a different currency into the client in a single transaction		however you can happily post one currency into the bank and a different currency into the client in a single transaction

	== Intercurrency conversion WITHOUT gain/loss - Intercurrency Conversion Account ==		=== Intercurrency conversion WITHOUT gain/loss - Intercurrency Conversion Account ===

	<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the actual amount to the bank.		<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the actual amount to the bank.
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	<B>-- CLIENT --</B>: ok		<B>-- CLIENT --</B>: ok

	== Intercurrency conversion WITH gain/loss - Exchange Gain/Loss Account ==		=== Intercurrency conversion WITH gain/loss - Exchange Gain/Loss Account ===

	<B>-- NEOSYS SUPPORT --</B>: if you are fairly clear on this I can tell you the more usual case where the base DOESNT agree exactly due to bank charges etc		<B>-- NEOSYS SUPPORT --</B>: if you are fairly clear on this I can tell you the more usual case where the base DOESNT agree exactly due to bank charges etc

Steve at 10:31, 25 February 2018

2018-02-25T10:31:29Z

← Older revision		Revision as of 10:31, 25 February 2018
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	~~__FORCETOC__~~		== Working of Inter Currency Conversion ==
	== ~~Motivation for Intercurrency~~ Conversion ~~Account~~ ==

	<B>-- NEOSYS SUPPORT --</B>: NEOSYS, behind the scenes mostly, keeps a complete double entry trial balance and set of accounts for <i>each currency independently</i>.		<B>-- NEOSYS SUPPORT --</B>: NEOSYS, behind the scenes mostly, keeps a complete double entry trial balance and set of accounts for <i>each currency independently</i>.

Steve at 14:35, 14 February 2014

2014-02-14T14:35:09Z

← Older revision		Revision as of 14:35, 14 February 2014
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	then NEOSYS revaluation checks that the base books agree with the currency balances AT THE LATEST RATES		then NEOSYS revaluation checks that the base books agree with the currency balances AT THE LATEST RATES

	and and discrepancy is chucked into the GAIN AND LOSSES account in the P&L where it causes ~~endless~~ pain if wrong		and and discrepancy is chucked into the GAIN AND LOSSES account somewhere in the P&L where it causes a lot pain if wrong because it hits profit/loss

	<B>-- CLIENT --</B>: aha. ok		<B>-- CLIENT --</B>: aha. ok
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	in some companies which are not sophisticated currency-wise, the currency books and the base currency books are never really compared		in some companies which are not sophisticated currency-wise, the currency books and the base currency books are never really compared

	this allows ~~the~~ finance team to DEAL ONE WAY WITH THEIR CLIENTS IN ANOTHER WAY WHEN REPORTING TO THEIR MANAGEMENT		this allows their finance team to DEAL ONE WAY WITH THEIR CLIENTS IN ANOTHER WAY WHEN REPORTING TO THEIR MANAGEMENT

	client/suppliers/banks only care about currency		client/suppliers/banks only care about currency
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	ie if you add up all the foreign currency from all the accounts .. it doesnt balance		ie if you add up all the foreign currency from all the accounts .. it doesnt balance

	in ~~most~~ systems, currency is just a comment on ~~the essential~~ accounts like client/supplier/banks		in many financial systems, currency is just a comment except on accounts like client/supplier/banks

	in NEOSYS we make sure that each and every currency is also balanced to zero using double entry accounting		in NEOSYS we make sure that each and every currency is also balanced to zero using double entry accounting
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	by default, NEOSYS presents all currencies to you as a consolidated position so you think you have one set of books		by default, NEOSYS presents all currencies to you as a consolidated position so you think you have one set of books

	20 currencies ... in NEOSYS ~~corresponds to 40~~ separate books of accounts		if you transact in 10 currencies ... NEOSYS keeps 20 separate books of accounts

	each currency has a balancing set of books in currency amount and its base amount		each currency has a balancing set of books in currency amount and its base amount

	<B>-- CLIENT --</B>: yes. 20 in the base and 20 in the foreign currency		<B>-- CLIENT --</B>: yes. 10 in the base and 10 in the foreign currency

	same set		same set
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	<B>-- NEOSYS SUPPORT --</B>: so NEOSYS DOESNT MIX CURRENCIES AT ALL DEEP DOWN		<B>-- NEOSYS SUPPORT --</B>: so NEOSYS DOESNT MIX CURRENCIES AT ALL DEEP DOWN

	it will ~~happily~~ prepare reports for ~~the whole lot merged~~		as you would expec, NEOSYS will prepare financial reports for all currencies consolidated

	~~but~~ that is ~~just~~ the default a reporting ~~choice~~		that is the default reporting option but it isnt a fixed part of the system

	it isnt a fixed part of the system

	in a NEOSYS client whose base currency is AED, in settings you can select USD only and option: UNCONVERTED		in a NEOSYS client whose base currency is AED, in settings you can select USD only and option: UNCONVERTED
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	i noticed this while investigating ledger printouts in multi-currency		i noticed this while investigating ledger printouts in multi-currency

	<B>-- ~~NEOSYS SUPPORT~~ --</B>: ~~thats vague~~		<B>-- CLIENT --</B>: when you send statements to clients from NEOSYS it will print the currency slices separately without any base currency showing

	~~<B>-- CLIENT --</B>: requesting~~ for ~~specific~~ currency ~~ledgers of a particular account~~		clients a) don't case about your base currency and b) expect to see a separate statement for each currency that they deal in with you EVEN IF YOU PUT ALL CURRENCIES INTO A SINGLE NEOSYS ACCOUNT

	~~<B>-- NEOSYS SUPPORT --</B>: when you send statements to clients it AUTOMATICALLY prints the currency slices separately~~		a common error that accountants new to NEOSYS make is to assume that you must open separate accounts for each currency that a client or supplier deals in

	~~since clients~~ a~~) don't case about your base currency and b) expect to see a separate statement for each currency that they deal in with you EVEN IF YOU PUT ALL CURRENCIES INTO A SINGLE NEOSYS ACCOUNT~~

	~~a classic~~ error that accountants new to NEOSYS make is to assume that you must open separate accounts for each currency that a client or supplier deals in

	a true multi-currency accounting system like NEOSYS allows mixed currencies in one account number but automatically gives multiple statements for each currency that is discovered in the account at the time of preparing the statement		a true multi-currency accounting system like NEOSYS allows mixed currencies in one account number but automatically gives multiple statements for each currency that is discovered in the account at the time of preparing the statement
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	you cannot use USD receipt to pay off AED invoices directly		you cannot use USD receipt to pay off AED invoices directly

	you can happily post one currency into the bank and a different currency into the client ~~though~~		however you can happily post one currency into the bank and a different currency into the client in a single transaction

	== Intercurrency conversion WITHOUT gain/loss - Intercurrency Conversion Account ==		== Intercurrency conversion WITHOUT gain/loss - Intercurrency Conversion Account ==

	<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the ~~actualy~~ amount to the bank ~~can be overridden~~.		<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the actual amount to the bank.

	<B>-- NEOSYS SUPPORT --</B>: NEOSYS doesnt insist that you balance the currencies in a single voucher since it will happily reverse everything into the exchange gains and losses or inter currency conversion a/c		<B>-- NEOSYS SUPPORT --</B>: Yes. NEOSYS doesnt insist that you balance the currencies in a single voucher since it will happily reverse everything into the exchange gains and losses or inter currency conversion a/c

	~~yes~~

	<B>-- NEOSYS SUPPORT --</B>: bank a/c +1000USD (+3670base) client a/c -3670AED (-3670base) .... and NEOSYS adds two more voucher lines Intercurrency conversion account -1000USD (-3670) and Intercurrency conversion account +3670AED (+3670base)		<B>-- NEOSYS SUPPORT --</B>: bank a/c +1000USD (+3670base) client a/c -3670AED (-3670base) .... and NEOSYS adds two more voucher lines Intercurrency conversion account -1000USD (-3670) and Intercurrency conversion account +3670AED (+3670base)
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	<B>-- CLIENT --</B>: the client account should be -1000USD (-3670base) . right?		<B>-- CLIENT --</B>: the client account should be -1000USD (-3670base) . right?

	<B>-- NEOSYS SUPPORT --</B>: no, ~~we are doing a currency conversion for the client to pay off AED invoices so the~~ client account ~~will be~~ credited ~~as mentioned~~ with -3670AED (-3670base)		<B>-- NEOSYS SUPPORT --</B>: no, The client account is credited in this example with -3670AED (-3670base)

	~~this is~~ a ~~receipt so we are increasing the bank and dropping the amount~~ the client ~~owes us by 3670AED~~		in the above transaction we have decided to do a currency conversion for the client in order to pay off some AED invoices

	presumably the clients account has some AED invoices to pay off		presumably the clients account has some AED invoices to pay off

			this is a receipt so we are increasing our bank balance by 1000USD and decreasing the amount the client owes us by 3670AED

			we decide or agree with the client how much AED to give to the client in return for their payment of USD

			we are acting as a currency exchange broker for the client

			in the example given, we are converting the clients USD to AED at our standard accounting rate therefore there are no exchange gains and losses

			This does not have to be the case though. We could have a agreement that USD receipts will be used to pay off AED invoices at some other rate

	DR +bank		DR +bank
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	<B>-- CLIENT --</B>: right, but doesnt he client a/c also have to be in USD?		<B>-- CLIENT --</B>: right, but doesnt he client a/c also have to be in USD?

	<B>-- NEOSYS SUPPORT --</B>: ~~why?~~		<B>-- NEOSYS SUPPORT --</B>: no need and remember we already debited the client with some AED invoices in AED.

	~~it can just be a note~~ on the ~~transaction~~.		The USD is certainly information available on the receipt voucher but the entry on the clients account is formally AED.

	<B>-- CLIENT --</B>: ok. got it.. sorry. you cannot use USD receipt to pay off AED invoices		<B>-- CLIENT --</B>: ok. got it.. sorry. you cannot use USD receipt to pay off AED invoices

Steve: /* Motivation for Intercurrency Conversion Account */

2014-02-14T12:26:29Z

Motivation for Intercurrency Conversion Account

← Older revision		Revision as of 12:26, 14 February 2014
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	but in the end NEOSYS has always proved to be correct		but in the end NEOSYS has always proved to be correct

	~~ideally for~~ some companies ~~...~~ the currency books and the base currency books ~~would~~ never be compared		in some companies which are not sophisticated currency-wise, the currency books and the base currency books are never really compared

	~~so you can~~ DEAL WITH ~~YOUR~~ CLIENTS IN ~~ONE~~ WAY ~~AND REPORT~~ TO ~~YOUR BOSSES IN ANOTHER WAY~~		this allows the finance team to DEAL ONE WAY WITH THEIR CLIENTS IN ANOTHER WAY WHEN REPORTING TO THEIR MANAGEMENT

	client/suppliers/banks only care about currency		client/suppliers/banks only care about currency
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	boss/management only care about base currency since they want ONE set of reports eg balance sheet and profit and loss that represents the whole picture of all currencies		boss/management only care about base currency since they want ONE set of reports eg balance sheet and profit and loss that represents the whole picture of all currencies

	accountants must be schizophrenic		accountants must be schizophrenic.

	on one hand they have to deal with real currency with their clients/suppliers/banks ... and the base equivalent is IRRELEVENT to operations		on one hand they have to deal with real currency with their clients/suppliers/banks ... and the base equivalent is IRRELEVENT to operations

	and on the other hand they have to prepare reports to management/shareholders in pure base currency ,,, and the currency amount is IRRELEVENT to management/sholders		and on the other hand they have to prepare reports to management/shareholders in pure base currency ,,, and the currency amount is IRRELEVENT to management/sholders

			NEOSYS facilitates this necessary schizophrenic view but at the same time meticulously ensures that the two alternative views are reconcilable

	<B>-- CLIENT --</B>: i get the concept		<B>-- CLIENT --</B>: i get the concept

Steve: /* Motivation for Intercurrency Conversion Account */

2014-02-14T12:20:04Z

Motivation for Intercurrency Conversion Account

← Older revision		Revision as of 12:20, 14 February 2014
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	== Motivation for Intercurrency Conversion Account ==		== Motivation for Intercurrency Conversion Account ==

	<B>-- NEOSYS SUPPORT --</B>: NEOSYS, behind the scenes mostly, keeps a ~~completely~~ double entry, trial balance and set of accounts for each currency independently.		<B>-- NEOSYS SUPPORT --</B>: NEOSYS, behind the scenes mostly, keeps a complete double entry trial balance and set of accounts for <i>each currency independently</i>.

	there is an interesting concept that should perhaps illustrate something to you		there is an interesting concept that should perhaps illustrate something to you

Steve: /* Motivation for Intercurrency Conversion Account */

2014-02-14T12:18:41Z

Motivation for Intercurrency Conversion Account

← Older revision		Revision as of 12:18, 14 February 2014
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	== Motivation for Intercurrency Conversion Account ==		== Motivation for Intercurrency Conversion Account ==

	<B>-- NEOSYS SUPPORT --</B>: ~~eg foreign currency handling~~		<B>-- NEOSYS SUPPORT --</B>: NEOSYS, behind the scenes mostly, keeps a completely double entry, trial balance and set of accounts for each currency independently.

	NEOSYS, behind the scenes mostly, keeps a completely double entry, trial balance and set of accounts for each currency independently.

	there is an interesting concept that should perhaps illustrate something to you		there is an interesting concept that should perhaps illustrate something to you
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	<B>-- CLIENT --</B>: yes		<B>-- CLIENT --</B>: yes

	<B>-- NEOSYS SUPPORT --</B>: ~~there is~~ a CONTROL ~~by having TWO sets of accounts~~		<B>-- NEOSYS SUPPORT --</B>: double entry accounting works by implementing a CONTROL

	control means checking versus something else		control means checking versus something else

	ok the same trick is done with currency		In NEOSYS the same trick is done with currency

	'''NEOSYS keeps TWO sets of double entry books'''		'''NEOSYS keeps TWO sets of double entry books'''

	one in pure currency		one in pure currency per currency

	and one in pure base currency		and one in pure base currency per currency

	complete two sets of books for the whole company		complete two sets of books for the whole company

	in parallel		in parallel

			many financial software systems do not keep separately balancing double entry accounts per currency and lack this secondary control that is present in NEOSYS

			in order to do this NEOSYS ensures that in every journal voucher, not only the base currency amount balances but so does every currency on the transaction balance to zero

	<B>-- CLIENT --</B>: thats in the current system		<B>-- CLIENT --</B>: thats in the current system

Steve at 11:58, 14 February 2014

2014-02-14T11:58:35Z

← Older revision		Revision as of 11:58, 14 February 2014
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			__FORCETOC__
	== Motivation for Intercurrency Conversion Account ==		== Motivation for Intercurrency Conversion Account ==

Steve at 11:56, 14 February 2014

2014-02-14T11:56:20Z

← Older revision		Revision as of 11:56, 14 February 2014
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			== Motivation for Intercurrency Conversion Account ==

	<B>-- NEOSYS SUPPORT --</B>: eg foreign currency handling		<B>-- NEOSYS SUPPORT --</B>: eg foreign currency handling

			NEOSYS, behind the scenes mostly, keeps a completely double entry, trial balance and set of accounts for each currency independently.

	there is an interesting concept that should perhaps illustrate something to you		there is an interesting concept that should perhaps illustrate something to you
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	you can happily post one currency into the bank and a different currency into the client though		you can happily post one currency into the bank and a different currency into the client though

	~~Sent at 5:46 PM on Sunday~~		== Intercurrency conversion WITHOUT gain/loss - Intercurrency Conversion Account ==

	<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the actualy amount to the bank can be overridden.		<B>-- CLIENT --</B>: ok. so while posting receipt we have to calculate the equivalent for the client and enter it and the actualy amount to the bank can be overridden.
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	yes		yes

	~~Sent at 5:48 PM on Sunday~~

	<B>-- NEOSYS SUPPORT --</B>: bank a/c +1000USD (+3670base) client a/c -3670AED (-3670base) .... and NEOSYS adds two more voucher lines Intercurrency conversion account -1000USD (-3670) and Intercurrency conversion account +3670AED (+3670base)		<B>-- NEOSYS SUPPORT --</B>: bank a/c +1000USD (+3670base) client a/c -3670AED (-3670base) .... and NEOSYS adds two more voucher lines Intercurrency conversion account -1000USD (-3670) and Intercurrency conversion account +3670AED (+3670base)
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	<B>-- CLIENT --</B>: the client account should be -1000USD (-3670base) . right?		<B>-- CLIENT --</B>: the client account should be -1000USD (-3670base) . right?

	<B>-- NEOSYS SUPPORT --</B>: no ~~because~~ we are doing a currency ~~connversion~~ for the client to pay off AED invoices		<B>-- NEOSYS SUPPORT --</B>: no, we are doing a currency conversion for the client to pay off AED invoices so the client account will be credited as mentioned with -3670AED (-3670base)

	this is a receipt so we are increasing the bank and ~~droping~~ the amount the client owes us		this is a receipt so we are increasing the bank and dropping the amount the client owes us by 3670AED

			presumably the clients account has some AED invoices to pay off

	DR +bank		DR +bank
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	<B>-- NEOSYS SUPPORT --</B>: why?		<B>-- NEOSYS SUPPORT --</B>: why?

	it can just be a note on the transaction		it can just be a note on the transaction.

	<B>-- CLIENT --</B>: ok. got it.. sorry. you cannot use USD receipt to pay off AED invoices		<B>-- CLIENT --</B>: ok. got it.. sorry. you cannot use USD receipt to pay off AED invoices
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	oh. ok		oh. ok

	<B>-- NEOSYS SUPPORT --</B>: basically intercurrency accounting ~~has to be~~ turned into single currency accounting using ~~a new concept call~~ the "intercurrency conversion" account if the base amounts agree		<B>-- NEOSYS SUPPORT --</B>: basically intercurrency accounting in NEOSYS is turned into single currency accounting using an account called the "intercurrency conversion" account if the base amounts agree

			or "exchange gains and losses" if the base amounts do not agree

	we have to invent something called ICC (get it?) in order to reduce all multicurrency transactions to combinations of single currency transactions		we have to invent something called ICC (get it?) in order to reduce all multicurrency transactions to combinations of single currency transactions
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	<B>-- NEOSYS SUPPORT --</B>: what seems like a complexity in the voucher turns out to have radically simplifying effect on the books		<B>-- NEOSYS SUPPORT --</B>: what seems like a complexity in the voucher turns out to have radically simplifying effect on the books

	ie every currency ~~balances~~ independently and can be viewed as standing alone from all other currencies		ie every currency will balance independently and can be viewed as standing alone from all other currencies

	<B>-- CLIENT --</B>: ok		<B>-- CLIENT --</B>: ok

	~~incase~~ you had to directly post the USD to the client ~~aswell~~?		in case you had to directly post the USD to the client as well?

	<B>-- NEOSYS SUPPORT --</B>: i gave the answer in detail already ...		<B>-- NEOSYS SUPPORT --</B>: i gave the answer in detail already ...
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	a) convert the currency in the account - remove 1000USD and give them 3670AED		a) convert the currency in the account - remove 1000USD and give them 3670AED

	b) presumably to allocate all in one go		b) presumably to allocate all in one go

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	<B>-- CLIENT --</B>: ok		<B>-- CLIENT --</B>: ok

			== Intercurrency conversion WITH gain/loss - Exchange Gain/Loss Account ==

	<B>-- NEOSYS SUPPORT --</B>: if you are fairly clear on this I can tell you the more usual case where the base DOESNT agree exactly due to bank charges etc		<B>-- NEOSYS SUPPORT --</B>: if you are fairly clear on this I can tell you the more usual case where the base DOESNT agree exactly due to bank charges etc
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	<B>-- CLIENT --</B>: q3 - 30 AED ?		<B>-- CLIENT --</B>: q3 - 30 AED ?

	<B>-- NEOSYS SUPPORT --</B>: read the question		<B>-- NEOSYS SUPPORT --</B>: read the question exactly

	<B>-- CLIENT --</B>: yes. i have		<B>-- CLIENT --</B>: yes. i have

Steve at 11:20, 14 February 2014

2014-02-14T11:20:01Z

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2008-07-31T21:27:34Z

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