Multiple Currencies Adjusting Entry Loan Payable 1350

QuickBooks Online 2021 multiple currencies, adjusting entries related to a loan payable. Let’s get into it within two it’s QuickBooks Online 2021. Here we are in our QuickBooks Online multiple currencies practice file in prior presentations, we turned on the multiple currencies and set up the free 30 day trial to test them out. This being a good idea typically, because once turned on, you can’t turn off the multiple currencies, you can turn them on, by going to the cog up top, go into the account and settings and then in the advanced settings turning on the multiple currencies, we’re going to now be opening up our financials balance sheet and income statement by going to the tab up top right clicking on it, duplicate,


duplicate again duplication of a duplication process right clicking on the tab up top and duplicate again, opening up now balance sheet and income statement starting with the income statement PnL profit and loss, we’re going to go to the reports on the left hand side to do so up and open up the PnL profit and loss to the date range change up top from a one a one to zero to 1231 to zero, let’s go ahead and run that report. Close up the hamburger hold down Control scroll up just a bit.



So we’re at that one to 5%, then to the tap to the left, going back down to the reports on the left hand side doing the date range on this we need the balance sheet and open up the balance sheet vs balance sheet report date range change, then up top from a 10120 to 1230 120. Running that report, closing up the hamburger. And then this is what we have thus far. So we then purchased equipment on the books when we did so we put it on the books at the 41 six, then we pay for it not with cash. But we’re going to pay for it in the future.



Not only that, but with foreign currency which means we could have set it up with a accounts payable account. However, if there was a larger loan or something like that, it would be more traditional to finance it with the with the loan payable type of account. So there’s a slight difference between those two types of ways that we can deal with the item within QuickBooks with regards to us now paying off the account, which is what we’re we’re kind of thinking about at this point in time. We’re thinking about the activity of now it becoming due and paying off this liability, we’re going to be paying it off once again in foreign currency that being in our case yen.



Now when it’s in a loan payable type of account before we can pay it off, we kind of have to revalue the process, revalue it to get up to the current rate. And then we’ll pay it off. That’s a little bit different than an example we’ll see in the future one similar to the accounts receivable process we’re in if there was no adjusting entry, if we were not going over the cut off period, if it was in accounts payable, we can then go back, I’m going to go to the first tab, we could then hit the plus button and just enter the the pay bill type of item,



which would kind of complete the transaction and record the difference between the currencies at the point in time that we created the bill to when we paid it, due to the fact that we set it up as a loan payable, we’re gonna have to deal with that a little bit differently. So we’ll get back to kind of like the bill later. Also just realize that whether we be using, I’m going to go back to the balance sheet, a accounts payable account or a loan payable account. If we have something that’s going to go off the cutoff period, or say at the end of the month or the year and we need an adjusting entry, then we might have to do a similar process that we’re doing here in order to revalue our accounts to the current spot rate as of the end of the year or the end of the month.



So let’s see it in Excel. first two were in the same kind of area in Excel, we got our machinery on the books, we put it on the books at the spot rate exchange rate at the point in time that we purchased the machinery and we have this loan payable on the books now. Now at the at the end of the period, we’re going to say like pretending this 1029 is like at the end of the month, if it were an adjusting entry, or if we’re simply just revaluing it in order to then pay it off.



We’ve got to revalue it to the current point in time. So what we need to do then is take the new spot rate which is going to be this point 106 and revalue our account to it a couple of ways we can do that. Let’s pull out the trusty calculator here, we’re gonna say okay, it’s 400,000 yen, times the new spot rate, which is one Jan is is point 106 dollars. So I’m going to say times, point 106. So now we’re at the 42 four note the 42. Four is less, I’m sorry, is greater than what it was before. Why would that be if we think about this, what happened to the value of the yen, it was one yen could purchase 104. Now one yen can purchase 106.



So the same one yen can now purchase more units or more fraction of a unit of dollars, therefore the yen has gotten stronger. At this point in time. We’re going to be paying in yen in the future. So the fact that we’re paying in something that has gotten stronger in relation to our currency is bad. We’re going to be paying something that is more valuable than it was when we currently made the deal here. So if I subtract this out to what it was before the 41, six, that’s a change kind of like a loss of $800. So I’m gonna have to write it up to the 800.



We could also calculate that by saying, point 106 minus point 104 times the 400,000 yen, that would be the $800 here. So we’re gonna have to then revalue and we’re gonna have to increase then our accounts payable or accounts payable or loan payable is a liability to increase it, it’s going to be a credit. So I’ll put it on the bottom. And then on the top, we’re going to have like a loss. So I’m going to say this is going to go to say a loss type of account, I’ll do the same calculation with a formula here equals, I’m going to hit brackets, I want to be picking up the point 106 point 106 minus 2.104, close up the brackets times the 400,000, there’s that $800.



That’s the debit. And that’s the credit. So if we record this out, then I’m going to go back on over we got a loss. Now, note, I’m recording the gain and loss in separate accounts. But you couldn’t match them up together, which I think is the way we’ll see it in QuickBooks, and then I’m going to meaning the net out gains and losses, and then double clicking on the loan payable plus and we’re going to pick up the $800. To record that out. Now we’re at the 42 four, so the 42 four, which once again, would be the 400,000, the end times the current spot rate of point 106. So now we’re at 42.



Four, that’s where we need to be, we need to be there if it wasn’t adjusting entry at the end of the time period to be at the proper point, if we’re going to present the financial statement as of that point. And if we’re going to be paying it off, then we have to revalue it to the current current amounts so that we could pay off the proper amount. So I’m going to go back then, to QuickBooks, let’s do kind of the same thing. Over here, we’re gonna have to do it with basically a journal entry.



So I’m going to go to the first tab. And I’m going to hold CTRL and scroll down just a bit. And then we’re going to go then to new and simply enter a journal entry for it. So I’m going to say journal entry, I’ll call it an adjusting journal entry. And I’m going to say this is going to be then in now I’m going to keep this one in US dollars, because the two accounts we’re affecting are going to be the US dollar representative of the changes in the foreign currency. So we’re going to keep this in the US dollar. Note that if I’m using this in practice,



I might want to use the software to know what the current exchange rates are. So to do that, I could go into this and say, Okay, let me take a look at the transaction here that we were looking into, which is this loan payable. If I go into that, and say, let’s go into that and see that transaction. And then we can see the exchange rate up top. Now if I did this, again, I might open up I might duplicate and record another type of transaction just so that we can see the foreign currency or or allow the QuickBooks system to calculate it for us,



I might then go Okay, let me mirror that by opening up another journal entry. I’m just going to say journal entry. And this one, I’m just going to not record it. But I’m just going to use the system to calculate what it should be, I’m going to make this in yen. And I’m going to change the date then to what would be the current date that we’re looking into, which I believe was 10 1020 910. And that would give me the current rate, right and I can mirror what I’m doing equipment, debit, credit, the loan payable, so I can say equipment, here equipment, and that was for the 400,000. And then the credit would be to the loan payable. Now I’m not going to record this.



But I can see what what the difference is here, there’s a difference in the exchange. Now this would give it to me in practice, it would give me the current rate. But this being a practice problem, I can then change that to what the current rate is, which is that point 106. So I’m just going to say pretend that this is point 106. And then just for this transaction, and then again, that’ll tell us the USD equivalent, which is now that 42,400. So then I can take my trusty calculator and say, okay, it needs to be 42 400.



And if I go back to the first tab, and I close this back out, and I scroll back up to my, to my balance sheet, I can see what’s in there, which is currently 41 six, so mine is the 41 six, that’s our $800 that I’ve got to increase this loan payable by which means it’s going to be a credit in terms of debits and credits. So on the loan payable, I’ll put that first just because I’m thinking of it first, even though it’s going to be a credit, I’m going to say the loan payable it’s got to go up by 800. I’m going to call it an adjusting entry. And then the other side is going to be going then to the exchange gain or loss. Let’s take a look at the income statement.



We call it exchange gain loss. Let’s pick that one up. Pick up the right account this time exchange gain loss. So there so there we have it. Now let’s go and then actually the date should be, I’m going to say 10. I said 29 to zero, I believe. And again, if it was the end of the month, that should be basically the last day of the month. But I’m kind of mirroring this to our practice problem, which is done for two different reasons, both an adjusting entry, and to help us to record the transaction for it to be paid.



So I’m going to then say save it and close it, Save and Close. Let’s see if it does what we expect going back then to our next tab over to the balance sheet, and let’s refresh this report running this report. Then we see the 42. Four there, that looks correct. 42, four, if I go into that, there it is. So there’s the 41 six, there’s the 800 adjustment, that looks good. Going back then to the prior tab, if I go then to the next tab over to the income statement, hold Ctrl scroll up just a bit, I’m going to then run the report to refresh it.



And then we have the 460 now included in the gain or loss for the full time period. So in other words, if I went back to the prior tab, we can see here that if I was to net these out, this is for the full year to date, we’ve got the 460. And we recorded it here in one account. So gains and losses netted together in the exchange, gain and loss. And note that we put this in place kind of thinking about it as an adjusting entry as if it as if it was the end of of October. So we put it in there as of 1029, which should have been 1030 to zero. So it would be like kind of like the end of October that we put that in there.



So it was recorded in that month. And then we in the next month, of course, we’re going to pay it we would deal with it next month. So that’s one reason we might do that type of adjusting entry. We also just need to do that adjusting entry to get our our amount up to the proper amount, so that we can then pay off the proper amount. And so we’ll see that that’s going to be a little bit different than the if I went through accounts payable, because if I used the accounts payable feature, instead of loan payable,



then I can just use the pay bill feature, which would help us to calculate the proper the proper amount of gain or loss, just with that was just with that feature. The problem is if there is an adjusting entry, then that kind of throws a wrench into it, we have to do that same kind of thing we would have to do that we see with accounts receivable, which is to make an adjusting entry, then a reversing entry and then enter the bills payable.



So we’ll take a look at an example of that in the future. For now let’s just open up the trusty trial balance and check out where we stand at this point in time. I’m not going to record this journal entry I’m just use that for a test. Then if we go down to the reports down below, opening up the trustee TB the trial balance trial trial balance, running it range changing it up top from a 101 to zero to 1231 to zero, run it close the burger hold down Control and let’s check it to our our Excel sheet. So we got the 100,000 the 2560 so the 100,025 60 we got the 41 six and the 42 four, so the 41 six to 42 for the 127 three and the 460 127 three these to net out to then that 460

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