Currency deviation and rounding differences in customer payments

Manage the rate differences, which are the currency deviations, and record the rounding differences in M3 accounts receivable.

Outcome

Currency deviations and rounding differences are recorded on the accounts specified. You can review the individual transactions in 'General Ledger. Display Transactions' (GLS210), and the balance in 'GL Balance File. Display' (GLS215).

Accounts receivable and the general ledger are updated, according to the accounting rule and accounting option specified.

Before you start

Consider these are the setup elements:

  • You must configure the financial system.
  • You must define the accounting rules with accounting strings for recording currency deviations in 'Accounting Rules. Set' (CRS630):
    • AR30–301: Exchange rate gains
    • AR30–302: Exchange rate losses
  • You must define the accounting option 99 for recording rounding differences in 'AP Accounting Option. Open' (APS020).

Currency deviations and rounding differences

Currency deviations and rounding differences may occur when working with accounts payable and accounts receivable, and with journal vouchers in the general ledger.

Recording currency deviation

If a customer invoice is created in a foreign currency, the amount is automatically exchanged to local currency in the general ledger for internal purposes.

The received payment is recorded and allocated to the original invoice in 'Payment Received. Record' (ARS110). However, a rate difference may remain in the general ledger. This difference is automatically recorded in M3.

Rate differences are recorded according to the accounting rules defined. See the Before you start section. This table shows an example of currency deviation when an invoice is sent to a foreign customer in a foreign currency:
Amount type Foreign currency Rate Local currency Currency deviation

Invoiced amount:

1.000

8.2

8.200

Received amount:

–1.000

8.0

8.000

–200
The payment is then received in the same currency.

Consequently, this table shows account entries are created when recording the received amount:

Accounting Rules Account Debit Credit

*

8.200

Bank

8.000

AR30–302

Rate exchange loss

200

The asterisk (*) indicates the account entry based on the customer invoice.

Recording rounding differences

A small rounding difference may sometimes occur when the invoice eventually is fully paid. This rounding difference occasionally occurs when several partial payments are used to pay an invoice. The rounding difference is automatically recorded according to the accounting string and VAT method specified for accounting option 99.

For manually writing off rounding differences in ‘Payment Received. Record’ (ARS110), you can use a user-defined accounting option between 20 and 98, if necessary.
Note: You cannot use option 99 for this purpose.

VAT on currency difference

You can calculate VAT on currency differences. In 'FAM Function. Open Details' (CRS406) the parameter 'Currency rate variance' has these alternatives:
  • 1 = No, VAT will not be calculated.
  • 2 = Yes, VAT will be calculated but no document printed.
  • 3 = Yes, VAT will be calculated and a document will be printed showing the currency rate variance and VAT: Only valid for customer receipts.
When alternative 3 is selected, a document is created when a payment session is ended. One document is created per customer, currency code, and payment method. The document contains these information:
  • Customer and payer information
  • Invoice number, invoice amount, paid amount and currency rate variance for every invoice included in the payment session
  • A summary of the currency rate variance and VAT per VAT code, that is, the VAT summary box
  • A payment reference section with check number or drawee reference number
You can create accounting transactions to different VAT accounts depending on if the currency exchange variance is a gain or a loss. The parameter 'Different VAT Accounts' has these alternatives in (CRS406):
  • 0 = No, do not use different VAT accounts on currency gain and loss
  • 1 = Yes, use different VAT accounts on currency gain and loss

If you select alternative 1, the VAT on currency variance is recorded on different accounts if it is a gain or a loss. If the currency variance is a currency gain, the accounting entries are recorded according to accounting types 111 and 112. If the currency variance is a currency loss, the accounting entries are recorded according to accounting types 211 and 212.

The VAT on currency gains or losses and the currency gains or losses transactions are created per invoice and per VAT code.

This table shows the currency deviation where an invoice is sent to a foreign customer in a foreign currency:
Amount type Foreign currency Rate Local currency Currency deviation
Invoice amount 1.000 8.2 8.200
Received amount -1.000 8.0 8.000 -200
The payment is received in the same currency.
The parameter 'Different VAT Accounts is set to alternative 1 and the VAT rate is 25%. This table shows the created account entries when recording the paid amount:
Accounting rules Account Debit Credit
* 8.200
Bank 8000
AP30-302 Rate exchange gain 160
AP30-211 VAT on currency difference 40
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