beigesoftware - Multi-currency. Exchange gain or loss. Exchange difference.

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Multi-currency. Exchange gain or loss. Exchange difference.

Keywords: multi-currency, exchange gain or loss, exchange difference, foreign currency transactions.

If you sold a merchandise that is paid in a foreign currency, and you use the ACCRUAL method (you have to report a revenue for unpaid sales), and selling and payment currency exchange rates are different (because of different dates), then you will face "exchange difference". You will never face an exchange difference if you use the CASH method, except if you sell exactly currency. In that case, it's not actually an "exchange difference", it's a common "difference between purchase price and sales one", i.e. currency is regular goods in that case.

The most countries have a similar law about foreign currency transactions, that is:

You have to make records in national currency (and language).
A selling/buying transaction is made with the current exchange rate (booking date)
A payment transaction is made with the current exchange rate (payment date)
The difference between booking and payment rates (gain or loss) is a regular business revenue or expense.

Example of selling goods that are paid with foreign currency.

Create a new invoice and set foreign currency to EURO and exchange rate to 1.12 (on 7 Jun 2016), the add 2 "Pizza with cheese frozen" for 14.11 EURO:

Add 100 pounds of "bacon" for 10.15 EURO:

After adding 28.5 hours of "delivering to the seaport" for 5.52 EURO and posting the full report is:

* As you can see, the accounting entries are made in the national currency.

See Overseas sales. Advanced internationalization to print an invoice translated in a foreign language (if it's needed).

The payment is made on 16 Jun 2016, and the exchange rate is 1.14, so you have to report the additional revenue "exchange gain" (1,368.62 - 1,344.61 = 24.01):

16 Jun 2016 10:26AM, Debit CashInBank."#1236786817 in Bank" Credit AccReceivable."OOO Berezka" for 1,368.62 USD

* after that the balance AccReceivable."OOO Berezka" is -24.01 (negative)

16 Jun 2016 11:15AM, Debit AccReceivable."OOO Berezka" Credit ExchangeGain for 24.01 USD

* Of course, you have to report additional business expenses such as "fee for wire transfer", "fee for currency exchange", etc.

You should add the new "Exchange Gain" account of type "Income revenue":

The accounting entries above are made with the documents:

You have to fill in a "Payment From" the "Total FO" field (total in foreign currency) for payments tracking (in foreign currency for such invoices):

Handling a big exchange rate, e.g. 0.0154781432211

In this case use negative foreign currency value, e.g. 1USD=63.12RUB. If RUB is national currency, then enter 63.12, otherwise (USD is national currency) enter -63.12. Application itself makes rate=1/63.12 for negative rate.