Sometimes, you'll need to spend money or deposit a payment in another currency. This might sound complicated, but Wave Accounting makes it easy to stay on top of this bookkeeping. Before we dive into some different situations where you might need to record foreign currency transactions, let's take a look at how we approach currency in Wave.
Business Currency/Home Currency:
This is the currency you set when you set up your Business. All of your reports in Wave are in your Business Currency.You can check this under Settings>Dates & Currency. This cannot be modified once you set up your business.
The currency of an Asset or Liability account. This is the currency of a current bank account that you’re using. If you've set up an asset account to track physical cash, make sure to choose the correct cash currency. You can set the currency of an asset or liability account when you add a new account to your Chart of Accounts.
The currency of a single transaction in Wave. Each transaction in Wave is in one currency, which is determined by the bank account currency of the transaction.
In the most common cases, you'll need to record a transaction that you've made while travelling, or because you withdrew money while travelling for your business. We've outlined these scenarios below. If you're looking for other foreign currency transaction types, we'd recommend checking out our FAQ.
Now that you have a better understanding of how Wave Accounting approaches currency, let's look at some examples of the types of transactions your business may need to record, and the best way to record them.
Transactions In the Currency of a Point of Sale
Let’s look at a case where my Business currency is USD but I recently took a trip to Toronto and purchased a lunch out for a client at a restaurant that charges in CAD. The receipt for the purchase reflects a purchase amount of $142.33 CAD, and I used my Chase card, which is a USD credit card. How should I record this transaction?
The best way to record this is to wait for Wave to automatically import the transaction from my bank, or upload a bank statement, which will import the transaction at the USD amount that actually got charged, $112.44. You can add a note with the original details of the transactions to keep for your records.
The important concept to understand is that even though you used your USD credit card to buy something that the merchant was selling in CAD, since you're using a USD credit card, this is the currency that you'll record the transaction in.
Something to note: If you enter the receipt using Wave Receipts, this is a case where you should wait and make sure that you see the amount that actually appears on your credit card statement and edit the transaction. Wave will use the mid-market rate from xe.com to approximate the USD total from an imported receipt that you enter if you select the currency as CAD.
Deposits or Withdrawals in a Foreign Currency Account
Make sure that you’ve set up the accounts in your Chart of Accounts with accurate account currencies that match your real bank accounts.
Let’s look at a case where my business Currency is US Dollars (USD) but I have multiple vendors in Canada, so I also open a Canadian dollars (CAD) account at the bank to write checks.
Let's say that I receive a refund check for $135 CAD from one of these vendors, which I'd like to deposit into my CAD account. All I have to do is enter the total of the deposit and select my CAD checking account. Wave knows the currency based on the Account Currency of the account I've selected. On the balance sheet, Wave uses the xe.com rate to approximate the value of this asset in my Business Currency for reports.
Depositing or Withdrawing Foreign Currency from your Home Currency Account
This seems tricky at the outset - you need foreign cash, which you take from your home currency account which is in US dollars. Suddenly, US dollars from your account can turn into Canadian dollars at an ATM. How do you track that?
Just like a point of sale transaction, wait for the bank import transaction to import to Wave. This is a record of the cost of the foreign currency that you exchanged for, and the transaction you need to reconcile to. You can make a note of the amount that you withdrew in the foreign currency in the notes section of the transaction.
If you are often managing cash in multiple currencies, we'd recommend checking out the article on managing petty cash to ensure that you're keeping track of the cash at your business.
In cases where you're moving money between accounts in different currencies, you'll want to check out this article on foreign currency transfers.