QuickBooks Online Exchange Rate Entry

Here is the scenario. You are getting paid for an invoice in Canadian dollars, and deposited the money into a US Bank. The bank adds an expense to your bank account for the difference in exchange rate. Say the customer owes you $4000. You deposit the  $4K, and the bank adds an expense from your bank account for $968.72. How do you enter this into QB Online?

1st way: You mark your $4000 invoice as paid in full. Then you add an expense to the bank account for $968.72. Post that check to Income. In WA State you're paying taxes on income, so it's important to post this correctly and reduce income. Now you can reconcile your bank account. Also your P&L and income are correct, but your sales report is short for that customer.

2nd way: Once you know what the exchange rate is you go back and enter a credit memo for the $968.72. A credit memo reduces an invoice. You have to redo the deposit too, because the invoice is only paid off with $3031.28 and the credit memo covers the rest. Your sales report and P&L are correct. You could even force a bank account reconciliation, because you'd be equally short on both sides, but that’s lousy bookkeeping. It's a pain for the next person to follow. I only do clean bookkeeping. 

I thought it was a bug. Tech support didn't think it was a bug, because this is double entry bookkeeping. What an idiot. I had to get off that call. Resolved to figure this out myself, I researched it late into the night. Turns out that QB Online software has a special feature just for this kind of problem.

Correct 3rd way. Once you know what the bank is going to deduct from your account, chose Refund Receipt from the + menu. Refund Receipt allows you to issue the client a refund and cut them a check too. You're not actually going to send them a check, so leave check # blank. It shows up as a bank withdrawal so you can reconcile cleanly, reduces your P&L income, AND your sales reports are correct. Success!

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