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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: