Sometimes, you'll need to spend money or deposit a payment in another currency. Accounting for this might sound complicated, but Wave makes it easy to stay on top of this bookkeeping. Let's take a look at how we approach currency in Wave, then dive into some different situations where you might need to record foreign currency transactions.
Business/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 confirm your business currency under Settings > Dates & Currency.
Your business currency cannot be modified once you set up your business.
Account currency
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.
Transaction currency
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 purchase or withdrawal that you've made 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 your business currency is US dollars (USD), but you recently took a trip to Toronto, and bought lunch for a client at a restaurant that charges in Canadian dollars (CAD). The receipt for the purchase reflects a purchase amount of $142.33 CAD, and you used your Chase card, which is a USD credit card. How should you record this transaction?
The best way to record this is to wait for Wave to automatically import the transaction from your bank, or upload a bank statement. This will import the transaction at the USD amount that was actually 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 you used your USD credit card to buy something that the merchant was selling in CAD. This means that, since you're using the USD credit card, this is the currency that you'll record the transaction in.
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 your business currency is USD, but you have multiple vendors in Canada, so you also open a CAD account at the bank to write checks.
Let's say that you receive a refund check for $135 CAD from one of these vendors, which you would like to deposit into your CAD account. All you have to do is enter the total of the deposit, and select your CAD checking account. Wave knows the currency based on the account currency of the account you've selected. On the balance sheet, Wave uses the xe.com rate to approximate the value of this asset in your 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 USD. Suddenly, USD from your account can turn into CAD at an ATM. How do you track that?
Just like a point of sale transaction, wait for the bank transaction to import to Wave, or upload a bank statement. 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, check 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.