Post a supplier part refund due to exchange losses

[Chris Barnes]

Hi.
I am using Sage Line 50 V11.0016 Accounts. I am a business owner and not an accountant and get confused very easily with accounting functions. So please provide step by step answers if possible.

I have a problem which occurs when you purchase items using a foreign currency, and get a refund in a foreign currency for the full amount, but when converted to GBP there is a discrepancy due to the varied exchange rates at the time of the events.

I purchased an item and paid for it in USD using paypal.
So I entered the supplier invoice in converted GBP. Total amount £90.39. Vat rate was T0. Carriage was free.
As I paid for it at the time of purchase, because of online ordering, I also posted a supplier payment from paypal which is a bank account to the supplier account.
About a month later, I return the item ordered because it was the wrong item, for a full refund.
The supplier issues a full refund in USD, into my paypal account. Due to exchange rate differences, the amount paid into my real paypal account in GBP was less than the original supplier invoice amount. £89.93

The difference is £0.46 which should end up being posted to the "Currency Charges" expense account, I assume.

So how should I handle this already paid supplier invoice?
Create a credit note for the £89.93 on the supplier account?
How do I allocate this credit note to the supplier invoice properly.
How do I record the monies received from the supplier through my paypal account?
How do I post the difference to the "7902 Currency Charges" expense account.

I am in a total mess here, having tried various examples for several sage forums, but nothing seems to be the same as my situation here, so any help you could give would be greatly appreciated.

Best Regards
Chris Barnes

[brucedenney]

Currency Charges is really for the bank charges on converting currency and doing CHAPS payments, rather than the Exchange Rate Variance.

So to account for the profit/loss on exchange you enter a transaction between the Supplier account and the Exchange Rate Variance (7906) nominal account.

This will be either a credit note or an invoice depending on if it is a profit or loss.

Following your example the transactions should be

Invoice (Cost of Sales 5xxx) £90.39
Payment (Paypal 12xx) £90.39

-a month passes by-

Credit (Cost of Sales 5xxx) £90.39
Refund (Paypal 12xx) £89.93
Loss on Exchange(Exchange Rate Variance 7906) £0.46

The Credit needs to be the same as the invoice as the nominal code they go to had no expenditure against it. The net effect of the transaction to 5xxx must be nil
In this example the balance on the account after the refund is negative because the credit note has not been fully satisfied by you receipt, the balance is the Exchange variance.

Because you are on an older version of Sage 50 you do not have a Supplier refund transaction, so... you have to do the refund as a bank receipt to the paypal bank against the 9999 nominal, you then move that to the supplier account with a dummy invoice to 9999 (9999 should return to 0)

To get rid of a negative balance on a supplier account you need an invoice, so enter an invoice to 7906 for the balance.
If this transaction had gone the other way and your refund was greater than the credit note then you would need to enter a credit note instead of an invoice for the Exchange variance.

[Chris Barnes]

Hi Bruce.

Thanks for explaining it properly to me. It seems to make perfect sense the way you have explained it.
I was confusing myself by trying to enter a credit note for 89.93 instead of the full invoice amount.

I really appreciate your help.

Best Regards
Chris Barnes