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How to Record Gain/Loss on Exchange Rates

Topic: Bills and Expense Tracking,Double-entry Bookkeeping,How-to | Comments Off on How to Record Gain/Loss on Exchange Rates

Posted on September 25, 2009 by Kelli Wall

dollarIf you do business with other countries, you can record exchange rate changes in your WorkingPoint account. These changes occur often due to the change in the value of a currency from the time you invoice your customer to the time you collect the money or from the time your vendor invoices you to the time you pay them.

Record your gain/loss on exchange rates in WorkingPoint with these easy steps:

For sales to other countries:

  1. Set up a bank account for your currency exchanges called “Exchanges” or something similarly descriptive. Use this account only to record currency exchanges.
  2. When you receive a payment from your customer, from the invoice, receive a payment for the full invoice amount and select the Exchange bank account as the deposit to account. This will close the invoice and mark it as paid.
  3. From the Exchange bank account, transfer the actual amount of cash you received from your customer to the bank account it was deposited to (or wired to).
  4. Using the Adjusting Entry form on the General Journal, record the difference of the invoice and the cash payment (transfer) from the Exchange bank account to the account you use to track your gain/loss (debiting and crediting each account so that the total cash received and gain/loss equals the invoice total and the exchange bank account balance is zero, if there are no other exchanges in progress).

For purchases from other countries:

  1. Use the same Exchanges bank account you created in Step 1 in the Sales example above or create the account now.
  2. When you pay the vendor for the goods you bought, from the bill form, record the payment for the full bill amount and select the Exchange bank account as the paid from account. This will close the bill and mark it paid.
  3. Using the Adjusting Entry form on the General Journal, debit the Exchange bank account for the payment amount and credit your checking account where the funds were withdrawn.
  4. Using the Adjusting Entry form on the General Journal, record the difference of the bill and the bill payment from the Exchange bank account to the account you use to track your gain/loss (debiting and crediting each account so that the total cash payment and gain/loss equals the bill total and the exchange bank account balance is zero, if there are no other exchanges in progress).

Stumped on how to handle a transaction in WorkingPoint? Contact us for help.

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