Transaction/Impact on General Ledger |
Debit |
Credit |
Post Invoice for US$1000. Exchange Rate = 1.20 |
|
|
Accounts Payable |
|
1200 |
Purchase/Expense |
1200 |
|
|
|
|
At end of month, Exchange Rate changes to 1.15.
Run AP83 with Restriction 8 for Invoice Rate = $1200.
Run AP83 with Restriction 8 for Current Rate = $1150.
Difference = $50 unrealized gain on exchange.
Post Accrual Entry using GL30. |
|
|
Accrued Exchange on AP (Liability Section) |
50 |
|
Exchange Gain/Loss (Expense Section) |
|
50 |
|
|
|
At this point Balance Sheet correctly reflects AP
at current rate
(Net of Accounts Payable plus Accrued Exchange on AP
accounts = $1150, which is value of AP83 at Current Rate) |
|
|
|
|
|
Purchase US$1000. Exchange Rate=1.15 |
|
|
US Bank |
1000 |
|
Domestic Bank |
|
1150 |
Exchange Gain/Loss |
150 |
|
|
|
|
Pay Invoice out of US Bank Account |
|
|
US Bank |
|
1000 |
Accounts Payable |
1200 |
|
Exchange Gain/Loss (uses Invoice Rate) |
|
200 |
|
|
|
Accrual for Gain on Exchange-AP reverses at month
end |
|
|
Accrued Exchange on AP |
|
50 |
Exchange Gain/Loss |
50 |
|
|
|
|
At this point the balance in the Exchange
Gain/Loss account=
$50 credit, which is the realized gain on exchange between
posting the Invoice at 1.20% and paying the Invoice at 1.15% |
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|
|
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|