Accounts Payable Certification Practice Test

Where do conversion rate defaults apply in expense reporting?

1. Only for cash expenses.

2. Only for corporate card transactions.

3. For both cash and corporate card expenses.

4. Only for reimbursement processes.

The correct answer is: For both cash and corporate card expenses.

In expense reporting, conversion rate defaults are applied to both cash and corporate card expenses because these two types of expenses often involve transactions made in foreign currencies. When an employee incurs a business expense in a foreign currency, it needs to be converted to the company’s functional currency for reporting and reimbursement purposes. Having a default conversion rate ensures consistency and accuracy in reporting these expenses, regardless of the payment method used. By allowing conversion rates to apply to both cash expenses (where an employee pays out of pocket) and corporate card expenses (where a company card is used for purchases), organizations can streamline their expense reporting processes. This approach reduces the risk of discrepancies that might arise from using different conversion rates for different types of transactions, ultimately enhancing the reliability of financial reporting and analysis.