Multi-Currency System Differences - Source Accounting Software versus Xero

Multi-Currency System Differences - Source Accounting Software versus Xero

Multi-Currency

We do not offer a multi-currency conversion service.  However, even though we do not offer this service we are sharing the following information so you can take it into account when performing a manual conversion, or using another conversion supplier.

There are System Differences between source accounting software and Xero that will result in variations and special treatment of multi-currency in Xero:

Accounts Receivable and Accounts Payable

Xero has a single system account for Accounts Receivable and Accounts Payable. This account includes all Accounts Receivable and Accounts Payable including multiple-currency. In the source file, you can have an Accounts Receivable and Accounts Payable account per currency.  As a result, there may be differences when comparing the AR/AP reports between source data and Xero.

Conversion Balances

In the source accounting software file, it may be possible for clients to have used multiple exchange rates for each currency on one day. As an example, a client may have used a different exchange rate for a particular currency on the same day for sales, purchases and transactions in bank accounts. For the conversion balances, Xero uses ONE exchange rate in Xero for each currency. This ONE exchange rate is used to enter the balances for sales, purchases and the bank account. The exchange rate used during the conversion is provided by Xero using XE.com. Due to this, there may be variations in the unrealised gains/losses account.

Exchange Accounts

How the source accounting software and Xero handle multi-currency is quite different. During the conversion, these variances have to be considered.

In the source file, each currency account has an associated exchange account. For example, a foreign currency bank account will have an associated exchange account and a Foreign Accounts Receivable or Payable account will have an associated exchange account. In Xero, there is one bank account for each currency, a single accounts receivable and a single accounts payable account. There are no associated exchange accounts.

In Xero, there are three system accounts that manage foreign currency gains and losses across all of the foreign currency accounts. Including:
  • Bank revaluations for Gains and Losses (497) - This account holds the total difference between what the funds in the account were worth on the day of payment compared with today's exchange rate
  • Unrealised currency Gains and Losses (498) - This account calculates the unrealised gains or losses on unpaid invoices or bills, calculated at today's exchange rate.
  • Realised currency Gains and Losses (499) - This account calculates the gains or losses recorded between the date that the invoice, bill or credit note was created and the date of payment.
During the conversion, you might have to merge the Unrealised Gains/Losses into the Xero system account for Unrealised Gains/Losses. In addition, the Realised Gains/Losses will need to be imported into the Xero system account for Realised Gains/Losses.

Exchange rates

In the source accounting software, the Exchange rate is user entered. Once data entry commences in Xero any new transactions will use Exchange rates that will fluctuate in accordance with the daily Foreign Exchange (FX) movements.

Data precision

The precision of numbers may be different between Xero and the source accounting software. In source accounting software unit prices may be expressed with more than 4 decimal places. In Xero, the unit prices are to 4 decimal places with the remainder of data to 2 decimals. This could lead to differences in the invoice total and require adjusting invoice/bill lines.

Handling of GST

Xero has a single GST / VAT system account. Some source accounting software has one for GST collected and another for GST paid. You will need to combine these two GST accounts into one system account for GST.

Xero calculates tax on a per-line basis, rounding to two decimal places, and then sums the tax totals of each line to calculate the total invoice tax. In contrast, the source file totals the Invoice and then calculates the tax amount, which can lead to a slight variance. If necessary create a manual journal to cater to these variances.

Setup variation

In the source accounting software sometimes the Chart of Accounts setup can include Headers and Sub-accounts. Xero does not have header accounts in the Chart of Accounts however customised reports can be created to include headers.

Accounting Practices

Sometimes in the source accounting software, it is possible to journal to control accounts such as bank accounts, accounts receivable and accounts payable. This can cause an out of balance between the subsidiary and control accounts. It can be a common occurrence in source accounting software that Accounts Payable or Accounts Receivable are paid off with a single journal. Xero does not permit this way of handling transactions. You may need to create a secondary Accounts Receivable or Accounts Payable account in Xero to bring in manual journals that have been coded to the control accounts in the source file.

Running Reports

When running Profit and Loss / Balance Sheet / Accounts Payable  / Receivable reports in Xero, there are system accounts (Unrealised Currency Gains and Losses) that will change daily based on the current exchange rate. If you have foreign currency bank accounts, invoices or bills then running reports today may show different amounts for the same reports run again the next day.

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