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Exchange Rate at Document Level

Contents

Introduction

This document describes how to use "Exchange Rate at Document Level" feature.

"Exchange Rate at Document Level" feature is an Openbravo 3.0 Core feature which is delivered in Openbravo 3.0 MP2.

There are certain business scenarios which require to use a conversion rate, because the document/s currency is not the same as the general ledger currency.
This project supports entering an exchange rate in the purchase invoices, sales invoice and other windows, just because it is not enough to use a central conversion rate defined at system level for a given period.

The exchange rate currently used while posting a document in another currency than the general ledger currency is the "central" one defined at a system level, however now the end-user will be able to manually enter a different "Exchange Rate" in a new tab, which therefore will be the one used while posting that document, see the image below:

ExchangeRateAccounting.png

When accounting a document, the system will look first for the exchange rate enter at document level and in case there is no exchange rate there, it will look for the exchange rate set up at system level.

End-user will be able to enter either an exchange rate, so the system calculates the "foreign amount" or a "foreign amount", for the system to calculate the "exchange rate".


It is also important to remark that there is another "Exchange Rate" field which is used while creating a payment in/out in a different currency than the financial account currency, as shown in the screen below:

ExchangeRatePayment.png

For more information, please take a look here: Multicurrency for APRM Functional Specifications

Above one is not the one to be used while posting a document in another currency than the general ledger currency, but while making the deposit/withdrawal of a payment in/out
in a financial account in a different currency than the payment currency
.

Workflow overview

There are several documents which are/can be involved in the accounting workflow:

  1. Invoices (sales/purchase)
  2. Payments (Payment In/Out)
  3. Financial Account transactions (Withdrawal/Deposit/Reconciliations)

The scope of this functionaly assumes that a payment is made or received in the same currency as the invoice, however invoices&payments could be in a currency other than the general ledger/s currency/ies.

Having said that, a company could have:

At any point in time there may be a difference in the Openbravo system exchange rate and the exchange rate used in a document created by a third party on that same date,
therefore it is possible now to enter exchange rates (document currency -> general ledger currency exchange rates), for the documents listed below:

In practice:

When processing/accounting a document, the system will look:

When reversing a document, the system must take into account:

Finally, it should be possible to either:

  1. entering the transactional currency amount (foreign document currency amount) and the domestic currency amount (general ledger currency amount), so that the exchange rate is deduced
  2. or entering the transactional currency amount and the exchange rate, so the domestic currency amount (general ledger currency amount) is deduced.

Note:
Finally, it is important to remark that:

Configuration

For information about how this feature must be configured, please take a look here:
Exchange Rate at Document Level Configuration Manual

Business Scenarios

This section describe how the system behaves now for those cases where there is a need to vary the exchange rate, that means that the global exchange rate setup at system level is not enough.

(This scenario would apply same way to sales).

A purchase invoice is received for USD 2675,00:

When this purchase invoice is posted, the conversion rate has changed to (1 USD = 1.34 EUR).
User is able to change the exchange rate at the "Exchange rate" tab, as described below:

BS 1.png

User post the invoice. The system will show below posting in EUR:

Account Debit Credit Calculation
Expense 3.350,00 2.500,00 * 1.34
Taxes 234,50 175,00 *1.34
Account payable 3.584,50 2.675,00 * 1.34

The payment for the invoice is made later:

BS 2.png

A new payment is created in the "Payment Out" window.
When this payment is posted, the conversion rate has changed once more to (1 USD = 1,38 EUR).

BS 3.png

User posts the payment. The system will show below posting in EUR:

Account Debit Credit Calculation
Account Payable 3.584,50 2.675,00 * 1.34
Currency Loss 107,00 3.691,50 -3 .584,50
In Transit Payment Account 3.691,50 2.675,00 * 1.38

Once in the Financial Account, end-user can add the payment out transaction.

BS 4.png

When this withdrawal is posted, the conversion rate has changed to (1 USD = 1,30 EUR).
User is able to change the exchange rate at the "Exchange rate" tab once more as described below:

Account Debit Credit Calculation
In Transit Payment Account 3.691,50 2.675,00 * 1.38
Withdrawn Payment Account 3.477,50 2.675,00 * 1.30
Currency Gain 214,00 3.691,50 - 3.477,50

This is the more complex scenario as the currency conversion rate is not fixed, therefore there are currency gains/losses to deal with.

If the end-user would have need to post the payment reconciliation, the conversion change rate used will have been the same, in our example (1 USD = 1,30 EUR).

System must take currency gain/loss accounts from the defaults accounts of the corresponding general ledger configuration.
Therefore below "default" accounts under the section "Bank" are used:

Reversal Documents

In the case of voiding/reverting an invoice or a payment document, the system should behave as explained below:

Invoice reversal

An invoice already posted can be voided/reversed:

By clicking on the "Reactivate" button and then choosing the action "Void".

By creating either an "AP Credit Memo" or an "AR Credit Memo" and then selecting the invoice being reversed in the "Reversed Invoice" tab.

By creating either an "Reversed Purchase/Sales Invoice" and then selecting the invoice being reversed in the "Reversed Invoice" tab.

By creating either a negative "AP Invoice" or a negative "AR Invoice" and selecting the invoice being reversed in the "Reversed Invoice" tab.

Payment/Withdrawal/Deposit reversal

Above documents can be reversed once posted by cliking on the "Unpost" button.
The exchange rate to be used while un-posting any of above the documents is exactly the same one as the one used while posting them.
Once reactivated, the process starts again.

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