Overview of the Entity-Level Multi-Currency Accounting functionality

If your company's entities operate in the same country, they can work with the same national currency and can use the same accounting currency. If some entity operates in another country, it might need to use other national and accounting currencies.

FirstBIT ERP provides the multi-currency functionality that can be configured at the entity level.

Setting up the functionality

First, you must add all the necessary currencies to the Money > Master Data > Currencies form. You need to add all the national currencies for the entities that operate in other countries and the accounting currencies to be used by the entities.

The functionality that allows different entities use different national and accounting currencies can be enabled by selecting the Entity-Level Multi-Currency Accounting option on the Administration > Settings > Money form.

This option is available only if the Multi-Company Accounting option is selected on the Administration > Settings > General Settings form.

Also, on the Administration > Settings > Money form, you can select the default national and accounting currencies. In case when the entity-level multi-currency functionality is not used, they will serve as the national and accounting currencies for each of the entities. For details, refer to Settings: Money.

For each entity, you can assign the accounting currency and the national currency in the entity master record: Accounting > Master Data > Entities.
For details, refer to Adding an Entity.

Before entering any transaction, you need to specify for each entity the exchange rates for the currencies the entity will use. For this, you need to define the reference currency with respect to which the exchange rates are recorded. Generally, the national currency is used as the reference currency. You can  manually add the current and historic exchange rates with respect to the reference currency or import them via an Excel spreadsheet. You can open the currency master record by clicking the button to the right in the Currency field, or open the Money > Master Data > Currencies form and click the Currency rates link on the top of the form.

Let us consider an example of a company comprising two entities:

Entity1 pays VAT taxes in UAE. All sales and purchasing transactions in foreign currencies are converted to AED. Exchange rates are imported from the UAE Central Bank. Financial reports are generated in AED.

As for Entity2 with SAR as the national currency, all sales and purchasing transactions in foreign currencies including AED are converted to SAR for VAT purposes - VAT is paid in SAR. The exchange rates for all currencies with respect to SAR can be imported from an Excel spreadsheet. Also, all transactions are converted to AED and posted to General Ledger.

Creating sales and purchasing documents

When an entity sells goods and services in the country of registration, it creates Quotations, Customer Orders, and Invoices. Information on exchange rates used for the document and the taxation option appears as the link on the Main tab of the document.

The Customer Order form. The Main tab

The contract currency (which is also the document currency), EUR as in the screenshot above, appears in the link with the exchange rate 4.0457 with respect to the entity's national currency, SAR.

If you need to review the data or enter another rates, click the link - this opens the Prices and Currencies dialog box.

The Prices and Currencies dialog box

When an entity purchases goods and services in the country of registration, it creates Purchase Orders, Invoices Received, Debit Notes, Additional Expenses, Requisitions and others. Information on exchange rates used for the document (contract) and the taxation option appears as the link on the Main tab of the document.

The Purchase Order form. The Main tab

The contract currency (which is also the document currency), EUR as in the screenshot above, appears in the link with the exchange rate 4.0457 with respect to the entity's national currency, SAR.

If you need to review the data or enter another rates, click the link - this opens the Prices and Currencies dialog box which is similar to the dialog box as is shown on the screenshot earlier. For details, refer to The Prices and Currencies dialog box (Purchasing).

Creating Payroll Documents

For documents in the HR and Payroll module, such as Employment Contracts, Employment Contract Changes, Payroll Calculations, Vacations, Accumulated Vacation Pay, Sick Leaves, Terminations, the default currency is the national currency of the entity. When you create any of this documents for a specific entity, the national currency assigned to the entity is used as the default currency, although you can use other currencies. On posting the documents, the amounts in other currencies are converted to the accounting currency of the entity and recorded to General Ledger.

Processing Taxes

The collected VAT amounts are reported for and paid in the national currency of the country where the entity is registered. If the sales or purchases were paid using foreign currencies (other than the national currency), the amounts of deals were converted to the national currency, and the taxes are calculated and paid in the national currency. 

Reporting

Financial reports can show you the financial information for each entity and the consolidated information for the company.

The following reports can be generated for the entire company showing the financial data for each of the accounting currencies:

• Income Statement (Monthly)
• Statement of Changes in Equity (Operational)
• Statement of Financial Position (Monthly)
• Trial Balance
• Cash Flow Statement
• Cash Flow Analysis
• Cash Asset Balances
• Accounts Receivable Aging (Accounting Currency)
• Accounts Payable Aging (Accounting Currency)

Some reports can be generated only on per entity basis; for instance, the following reports:

• Income Statement
• Statement of Financial Position (Balance Sheet)
• Statement of Changes in Equity
• Income and Expenses