Applying rounding amounts when working with different currencies
Managing payments and reconciliations across different currencies can be complex due to rounding differences. These differences arise when applying entries in different currencies to each other. Business Central includes standard settings to automatically handle rounding amounts in multi-currency transactions. This article explains how these settings apply in Bank Account Reconciliation and Payment Reconciliation Journal, and how rounding amounts are handled. This happens automatically when invoking the automatic matching or during a manual match.
Continia Banking can automatically match ledger entries for all currencies independently of the bank account’s currency, based on the settings in the Sales & Receivables Setup and the Purchase & Payables Setup. The standard matching routine in Business Central, only finds entries in the same currency and does not match entries in different currencies.
Important
The G/L account used for posting the rounding amounts must allow direct posting.
General settings in Business Central
Continia Banking follows the general settings in Business Central, based on the Appln. Rounding Precision field in the General Ledger Setup and the Appln between Currencies in the Sales & Receivables Setup and the Purchase & Payables Setup:
- The Appln. Rounding Precision field - this field, under the Application FastTab on the General Ledger Setup page specifies the rounding difference that will be allowed when you apply entries in LCY to entries in a different currency. If the rounding discrepancy falls within the specified tolerance, it is automatically adjusted. If it exceeds the threshold, the difference is transferred to the Rounding Precision G/L Account.
- The Application between Currencies field - this field, under the General FastTab of the Sales & Receivables Setup page and the Purchase & Payables Setup page, determines whether cross-currency applications are allowed. The options are:
- None – no cross-currency applications are permitted.
- EMU – only cross-currency applications between EMU European Monetary Union) currencies are allowed.
- All – cross-currency applications between all currencies are allowed.
- The Debit Curr. Appln. Rndg. Acc. field - this field on the Customer/Vendor Posting Group Card specifies the general ledger account to post rounding differences to.
To handle rounding differences in multi-currency transactions on the Bank Account Reconciliation page
The bank account reconciliation process ensures that bank transactions match the corresponding customer and vendor ledger entries. When dealing with foreign currency (FCY) bank accounts, reconciliation is limited to entries in the same currency. However, local currency (LCY) bank accounts allow payments in multiple currencies, depending on system settings.
To handle rounding amounts within the tolerance settings
If the rounding amount falls within the tolerance specified in the Appln. Rounding Precision field, the system retrieves the relevant data in the Bank Account Reconciliation. When a Payment Application Proposal is applied:
- If the difference is within the rounding tolerance, Continia Banking treats it as a rounding adjustment and posts it to the designated rounding G/L account.
- A rounding difference generates an additional journal line.
- Once posted, the process is complete.
To handle rounding amounts that exceed the tolerance settings
If the rounding amount exceeds the tolerance set in the Appln. Rounding Precision field, the line in Bank Account Reconciliation displays with status Difference, indicating an unresolved discrepancy.
To resolve differences:
Transfer the difference – select Transfer Difference to Account. This creates an additional line.
Post the difference – use Post All Journal Lines to process both the regular entries and the difference in one step. Alternatively, post lines individually in separate journals using the Post Journals option on the Payment Application Review page.
Review and Adjust – modify the transaction or apply the difference manually to a specific ledger entry.
To handle rounding differences in multi-currency transactions in the Payment Reconciliation Journal
The Payment Reconciliation Journal automates the matching of payments to open customer or vendor ledger entries. It ensures that the Amount to Apply is in the currency of the entry, which may differ from the bank account’s currency.
The system follows the Application Between Currencies field setting from Sales & Receivables Setup and Purchase & Payables Setup. The bank account currency is the default for application.
To handle rounding amounts within the tolerance settings
Rounding differences are generated during posting and displayed in the posting preview. If the difference falls within the rounding threshold, the system automatically applies the payment. The system posts rounding differences to the G/L account associated with the customer’s or vendor's posting group.
For example, a company with an LCY set to GBP processes a bank statement in GBP. A customer payment is matched to an invoice in USD, resulting in a rounding difference. The system automatically generates a rounding journal entry, which is visible on the Preview Posting page, ensuring the rounding amount is applied correctly.
To handle rounding amounts that exceed tolerance settings
If the rounding amount exceeds the tolerance:
Possible actions:
- Transfer the Difference – on the Payment Journal Reconciliation, select Transfer Difference to Account. This creates an indented line below the original entry.
- Review and Adjust – modify the transaction or apply the difference manually to a specific ledger entry.