In our organisation, the home currency is EGP (Egyptian Pounds). We regularly purchase and import material. The currency for these transactions is USD.

Can you please let me know what entries will be passed by BaaN at each stage in following scenarios:

Scenario 1

In the maintain currency rates session, the currency rate for USD to EGP is not regularly maintained. Let us assume that the rate updated there is 1 USD=5 EGP

Date 1st March 2003. A PO is raised in USD. In the PO the currency rate is changed to 1 USD = 6 EGP (correct rate as on that date).

Date 1st April 2003 Material against this PO is received. The surcharge and other costs are added and material is received in the warehouse.

Date 5th April 2003 Finance department used Match and approve process for this PO and changes the currency rate to 1 USD=6.5 EGP.

Date 5th May 2003. Finance department actually pays to the supplier..

Please note all this time the in maintain currency rates the rate is still 1 USD = 5 EGP.

The question is – what are the entries passed at each stage in this scenario.

Scenario 2.. Basically all the transactions are the same. The only fifference is that the maintain currency rates is correctly maintained. And the USD-EGP conversion rate as of 5th May 2003 is 7.0. In this case what entries will be passed in the Finance and how the two scenarios are different.

Also if there is a document explaining these entries and effect of Foreign Currency then I will be glad to receive the same.

Thanks and Regards

Hi,

In the first place, it is advisable to update the currency master on a regular basis, because this the default value which system picks up in the absence of a specific rate updated in the relevant processing session (like PO, matching etc). Letz look into the two scenarios mentioned by you.

Scenario 1

Here the rate maintained in currency master is not relevant till payment stage, since there are specific rates available in the Purchase order and the matching document. Following are the entries:
1. Taking receipt at the warehouse
Debit Purchase A/c
Credit Receivable Invoices A/c
(Price is the purchase order price and exch. rate is the PO
rate, i.e., 6 EGP (not 5 EGP)

2. Matching and approving in Finance
a) Debit Received Invoices A/c
Credit Suppliers' control A/c
(Price as per the bill. Rate as per Finance Document i.e.,
6.5 EGP)
b) Debit Receivable Invoices A/c
Credit Received Invoices A/c
(Rate 6.5 EGP)
c) Note earlier Receivable Invoices was credit at 6 EGP, now
it is debited at 6.5 EGP. There is an imbalance in the
account. System passes one more entry under the
combination Purchase + Receipt.
Debit Purchase A/c
Credit Receivable Invoices A/c
(Rate, the difference between old rate and new rate, i.e.,
6.5 - 6.0 = 0.5 EGP)
d) Supposing the above is already issued to production by
the time the Finance matches the invoice, the system
passes one more entry under the combination Purchase +
Lot result for the difference between the earlier lot result
and new lot result (calculated with the new rate i.e., 6.5
EGP) This entry will reduce the inventory and increase
the Work in progress or the varience account as per the
mapping.
3. Now the invoice is outstanding at EGP 6.5. For payment, if the Finance does not specify the latest rate, the payment will go at 5 EGP as per the currency master, and the difference of EGP 1.5 will be passed as exchange difference thus:

Debit Suppliers' Control A/c
Credit Exchange difference A/c

The above difference is the profit arising out of exchange rate fluctuation.

Scenario 2.

Basically all entries will be the same. But at the time of payment, the system considers EGP 7 instead of EGP 5 for payment. The difference is exchange loss (assuming that Finance matching rate is EGP 6.5 only). The exchange difference will be a loss entry thus:

Debit Exchange Difference A/c
Credit Supliers' Control A/c

Regards

Thanks a lot.

I want to know what are all the cost components in integration modules and how they get posted in finance.