What should be our Credit Rounding Account? NOT small.

Miklos_Hollender

It is NOT just used for rounding! For example when you have a foreign currency sales invoice, and you have a year end unrealized loss and then in next year it is paid and there is some further realized loss, this account is used heavily.

Currently I used our Realized/Unrealized Exchange Gains account as the Credit Rounding Account, because I thought gains grow normally on the credit side so OK. This led to bad results the auditors are criticizing.

Roughly this happened: accounting in EUR, customer invoiced in USD. €2000 loss booked at year end as unrealized loss at the year end revaluation. Booked to the Unrealized/Realized Exchange Loss account. Cool.

Then it was paid in January. Compared to year end, another €1000 loss, now realized. (Compared to the original invoice date €3000 loss, but that is wrong accounting, it is wrong to calculate it that way, because the €2000 loss was already in last years income statement or P/L.)

The correct booking would have been €1000 to the Realized/Unrealized Exchange Loss Account and all this "Credit Rounding Account" stuff should not be necessary I have no idea why is it used at all here! But what happened is that basically it booked €3000 to the Realized/Unrealized Exchange loss and -€2000 to the Credit Rounding Account - which is the same as our Exchange Gains account, so we have now €2000 gain and €3000 loss to show instead of €1000 loss and then the auditor is saying it is wrong this way.

So... should I have the Exchange Loss account set up as Credit Rounding Account? Is that the right way? Why does this even happen? Why is this even being used? What is the point of this "correction of remaining amount" when there is NO remaining amount? Because this is what gets booked here.

Miklos_Hollender

Any idea? This Correction of Remaining Amount stuff goes to these accounts. AFAIK this should be simply that that when a foreign currency customer or debitor ledger entry is only partially applied, then this Correction of Remaining Amount revaluates the rest to the new exchange rate. But actually when it is fully applied I still get a lot of correction of remaining amount. Can someone explain where to find this stuff in the generally accepted accounting principlies? I need to justify it to auditors that it is right!

This is typically not the usual invoice - payment scenarios, but rather compensations, for example when some bonus is paid back to customers or something. So for example a payment is booked and then a simply g/l to customer booking is applied to it.

Like accounting in EUR, and there is an USD payment: $-162,00, accounted at $-114,97

Then the accountant books something to the the compensation g/l account, don't ask me why, applies to the payment: $162,00, €121.26

So we have €6,29 exchange rate difference, loss or gain I am not sure but this should be loss or gain.

But it is not booked as loss or gain but as correction of remaining amount and goes to the credit rounding account or debit rounding account.

Can someone say what is this and how to justify this?

jglathe

Hi Miklos,

just took a look into CU12 to be sure: The only occurrence of new "Correction of Remaining Amount" entries is in the function CalcAmtLCYAdjustment, which gets called after application calculation, and after unrealized gain/loss calculation.
Let's have a look at the code of CalcAmtLCYAdjustment():

IF CVLedgEntryBuf."Currency Code" = '' THEN
  EXIT;

AdjustedAmountLCY :=
  ROUND(CVLedgEntryBuf."Remaining Amount" / CVLedgEntryBuf."Adjusted Currency Factor");

IF AdjustedAmountLCY <> CVLedgEntryBuf."Remaining Amt. (LCY)" THEN BEGIN
  InitNewCVLedgEntry(DtldCVLedgEntryBuf,GenJnlLine);
  InitOldCVLedgEntry(DtldCVLedgEntryBuf,CVLedgEntryBuf);
  DtldCVLedgEntryBuf."Entry Type" :=
    DtldCVLedgEntryBuf."Entry Type"::"Correction of Remaining Amount";
  DtldCVLedgEntryBuf."Amount (LCY)" := AdjustedAmountLCY - CVLedgEntryBuf."Remaining Amt. (LCY)";
  InsertDtldCVLedgEntry(DtldCVLedgEntryBuf,CVLedgEntryBuf,FALSE);
END;

When you have a look at the calling parameters (where it is called), you will find the remaining amount will be checked against the remaining amount (LCY), converted by the adjusted currency factor of (a) the applied entry, and (b), the applying entry. This should usually amount to a difference of 0,01 or something like that. When you have far higher amounts than this, something is wrong.
Possible causes:
a) Something is wrong with your adjustments. For example, if you have only realized gains/losses (and still the same remaining amount, no applications), you would see the same effect. Have you got modifications in Report 595?
b) The entries you're applying have different adjustment rates. This shouldn't happen, as Report 595 always takes all open entries until the ending date (and all applications afterwards) into account. Same question as a).

with best regards

Jens

Miklos_Hollender

Hi Jens, it is not Report 595 - it is happening not at this monthy/yearly adjustment but at applications. And there is usually no remaining amount at all this is why I don't get it.

jglathe

Hi Miklos,

Miklos Hollender wrote:

Hi Jens, it is not Report 595 - it is happening not at this monthy/yearly adjustment but at applications. And there is usually no remaining amount at all this is why I don't get it.

erm... there is no other code that modifies "Adjusted Currency Factor" for existing entries, only R595. Also, unrealized gains/losses are only created there (those in CU12 are only for cancelling out the existing ones on application). A mishap there would prepare the data for what you're seeing at the application of entries.

with best regards

Jens