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Understanding Net Worth Reports in a Multi-currency QuickBooks file
ID: 3895 Category: Accounts - Business Range - Desktop & Hosted (previously QuickBooks) Status: Resolved Views: 3280


My Net Worth Report does not report the Australian Dollar equivalent of some foreign currency accounts.  What can I do about it?


With multi-currency accounts you will issue invoices & receive bills at one exchange rate and receive and make payments at another exchange rate.  Depending on exactly how these payments are processed you will find that over time the Australian Dollar value of your foreign currency accounts may no longer be a true representation of the value of those foreign currency balances. 

Net Worth reports will not reflect the true value of the business. 

This phenomenon is due to exchange rate gains and losses being built into the Australian Dollar value of the balances and not reported in a separate account for exchange rates gains and losses. 


QuickBooks makes an attempt to recognise these differences when each transaction is completed.  Whenever you receive payment on a foreign currency Invoice, or make a payment on a foreign currency Bill, QuickBooks will recognise the exchange rate gain or loss on that transaction and automatically make an entry into the Exchange Gain/Loss expense account.  This step will take care of most exchange rate differences.

In some instances these steps will not result in an exact accounting of all exchange rate gains and losses:

1.    When a number of invoices or bills are received/paid by the one payment

2.    Rounding factors

3.    When invoices or bills are received/paid through a foreign currency bank account. 

To handle these circumstances QuickBooks provides the Home Currency Adjustment function. 

QuickBooks will allow you to adjust the Australian Dollar value of an account and transfer the difference to the Exchange Gain/Loss account without changing the foreign currency balance of the account.  Your reports will then report Australian Dollar values that reflect the true value of the foreign currency balances.

Net Worth reports will now be a true value of the business. 


In essence, this transaction will force the business to recognise any outstanding gains or losses on these accounts. 

The accounts most in need of a home currency adjustment will be:

         Foreign Currency Bank Accounts, Credit Cards, Loans

         Foreign Currency Accounts Receivable and Payable

         Foreign Currency Assets (including investments)

In calculating the value of the necessary home currency adjustment, users should consult with their Accountants.


Detailed Instructions

*****   Reckon recommends that home currency adjustment transactions be processed only by the Accountant.   *****


1.    Determine the amount of the difference between the current Australian Dollar value of the account and the Australian Dollar value at the reference exchange rate on the account, for every foreign currency account affected.

2.    Enter the home currency adjustment General Journals.

3.    Produce and printout reports.

4.    If you do not wish to recognise the exchange rate gains/losses at this stage, delete the home currency adjustment General Journals.  Your reports will revert to their original Australian Dollar values. 


Step 1:  Determining the amount of the home currency adjustment

1.    Create an Unrealised Gain/Loss Report:

a.    Reports > Multicurrency > Unrealised Gains & Losses

2.    Click Yes to Do you want to change the exchange rates to revalue your foreign accounts

3.    In the Exchange Rate column, enter the reference exchange rate for each currency and click OK

4.    Print out the Unrealised Gains and Losses report.


Step 2:  Enter Home Currency Adjustments

1.    Company > Make General Journal Entries

2.    Enter the first account to adjust; the contra account is Exchange Gain/Loss

3.    Enter the value calculated on the Unrealised Gains & Losses report

4.    For Accounts Receivable and Payable you must assign an individual  customer/supplier:

a.    we suggest you create a customer/supplier called Currency Adjustment

b.    you must create one such customer/supplier for every foreign currency Accounts Receivable and Payable you have.

c.    Remember you can have only one Accounts Receivable or Accounts Payable account on a General Journal entry

5.    Tick the box Home Currency Adjustment at the bottom of the form

6.    Click Save & Close or Save & New

7.    Repeat until all necessary accounts are adjusted

8.    Check that the Balance Sheet reflects the appropriate Australian Dollar values for the foreign currency accounts. 


Step 3:  Produce and printout your Net Worth and any other required reports.


Step 4:  Reverse or maintain Home Currency Adjustment

         If you do not intend to realise the Exchange Rate Gains and Losses, reverse the Home Currency Adjustment General Journals by deleting them.  Your reports will revert to their original Australian Dollar values. 

         If you intend to realise the Exchange Rate Gains and Losses, review the entry for Exchange Gains/Loss on the Profit & Loss Report.  Consult your Accountant on tax implications. 

The process is now complete.

Related Issues:
No related issue is available.

Submitted: 11/12/2010 Modified: 11/28/2011

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