Category Archives: 1 Basic Accounting

Inventories received in foreign currencies

You’re buying goods from international suppliers that send you their invoices in foreign currencies. That’s perfectly normal.

One thing to keep in mind at all times is that your accounting is always done in one currency and not various at the same time. You may trade in different currencies, but they should be translated into one for your accounting purposes. This “one currency” is called in accounting world “functional currency”.  Continue reading →

Accounting when transaction is done in a different currency as opposed to functional currency

I would first like to stress this – in your accounting you can do entries in only one currency. Only one and this will be called your “functional currency”. You may however have various currencies in use when it comes to dealing with your suppliers, customers and why not your employees.

So how does one translate into another? In your accounting you can only use your functional currency and for your transactions you’re free to use whichever is businesswise the best and most efficient.  Continue reading →

Currency differences when you obtain an invoice at a later date for goods

So what if you receive goods earlier than the invoice for them and as it happens, you need to take them into use right away. They need a price, that’s for one, but what if the price is quoted in a currency that fluctuates as compared to your functional currency?

Say that your functional currency is A and you bought something for 120B. The B in this case would be the foreign currency that fluctuates. The exchange rate is let’s say 1A = 1.2B.  Continue reading →

Should I account for goods without an invoice?

Initial response is always “no”. Why would you? Accounting for something without a source document is firstly not allowed by most regulations and secondly, how do you know if the supplier is shipping them with correct prices and if quality is important, how have they measured the quality etc. You shouldn’t account for goods without an invoice.  Continue reading →

Stage of completion – expenses exceed budgeted expenses

What happens if the expenses you budgeted are overrun and the agreement and transaction therein ends in a loss for your company?

Financial performance wise obviously you may see a way to change something within the transaction and service – materials to be used, less personnel, more effective approach and what not – that would be trying to achieve the goal.  Continue reading →

Accounting when using stage of completion for accounting revenue

Determining the stage or percentage of the transaction and how much of it is complete and what remains to be completed is one thing. It’s another, although not completely unrelated, to record the transactions in accounting. Under “transactions” I mean not only the revenue, but also receivables and liabilities.

The initial basis for any accounting record is usually either an agreement or an invoice. When performing services over a longer period and using stage of completion, you’re most likely bound to an agreement. This agreement defines the services, quantitative aspects if applicable and what’s more, it also sets out the payment schedule and if any conditions are related to those invoices.  Continue reading →