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Foreign Exchange Transactions
07-19-2015, 04:47 PM
Post: #1
Foreign Exchange Transactions
Hi all,

I have a question about posting invoices in USD. This is how I post it (We don't have a US account):

e.g. An invoice received in the amount of $1,000 USD. I do the conversion and enter the equivalent of CDN under the related expense account. On the second line, I use the Foreign Exchange item to record the exchange amount using the Bank of Canada exchange rate for the day:

Dr. Expense 1,250
Cr. Foreign Exchange 250
Cr. A/P 1,000


Is this the best way to post it? since the conversion rate would be different on the date of the payment from the amount I booked and there has to be an adjustment to correct it.

Thanks,

Hana
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07-22-2015, 08:56 AM
Post: #2
RE: Foreign Exchange Transactions
That's a good way of recording.
There will always be currency fluctuations.
I would go a step further, by making the foreign exchange account a subset of Accounts Payable.
A/P- Foreign Exchange

This way, when you pay the bill
Dr A/P
DR A/P foreign exchange
CR Cash in Bank

(07-19-2015 04:47 PM)Hana78 Wrote:  Hi all,

I have a question about posting invoices in USD. This is how I post it (We don't have a US account):

e.g. An invoice received in the amount of $1,000 USD. I do the conversion and enter the equivalent of CDN under the related expense account. On the second line, I use the Foreign Exchange item to record the exchange amount using the Bank of Canada exchange rate for the day:

Dr. Expense 1,250
Cr. Foreign Exchange 250
Cr. A/P 1,000


Is this the best way to post it? since the conversion rate would be different on the date of the payment from the amount I booked and there has to be an adjustment to correct it.

Thanks,

Hana
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Quote this message in a reply
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