Thread: Help with Accounts Payable

I have a supplier XYZ who is originally set up to be paid in CDN dollars. The supplier invoices in US dollars. I convert the invoice amount in US dollars to CDN dollars (I have a fixed exhange rate). When I receive payment from CDN customers in CDN dollars - I pay the supplier and depending on the exchange, it will result in a foreign exchange gain or loss - which will be cleared and posted to a foreigh exchange account.

Recently, there were changes: I placed an order to the supplier. The Proforma Invoice is in US dollars. I made a prepayment to the supplier in CDN dollars. My customer decides to pay in US dollars. I set up the supplier to be paid in US dollars - I named the supplier XYZ USD. I post the entire invoice in US dollars. I pay the balance of the invoice in US dollars. But now, I have a prepayement in XYZ and balance in XYZ USD. How do I clear this up?

Thanks

Hi there

The easiest way to clear this up is to have an account that you can post the other side of the entry to.

Set up a "Cash Clearing" account right under your bank account in the Chart of Accounts. Where it asks for the Class Options tab, choose "Bank".

When you go into the XYZ account to clear the prepayment, choose the Cash Clearing account instead of Bank for the option of where the other side of the entry will go.

When you go into the XYZ USD account to clear the balance, also choose the Cash Clearing account instead of Bank for the option of where the other side of the entry will go. This will clear things out of each account in the Accounts Payable module.

If you end up with a small difference between the two showing in the Cash Clearing account I imagine that would be the foreign exchange amount and you can clear that through the General Journal.

If you can understand what I'm getting at here it should work to clear those two balances.

Have a nice day!