Foreign Currency/Exchange - Account Setup

By adding a short list of accounts and periodic journal entries your reports with foreign currency accounts will reflect the correct domestic currency. Note the screen below has the Trial Balance sorted by Description, please see below for more details.

Journal entries adjusts the period end balances of the above Bank, AR and AP accounts, as well as reclassifying Revenue and Expenses.

For example, foreign currency sales are posted to foreign currency sales accounts and foreign currency customer accounts. The total sales and accounts receivable are then synchronized at month end with a journal entry at the existing exchange rate.

All the foreign currency sales accounts should be grouped together and totaled to a new Total foreign currency SALES (FX.SALES) account. All the foreign currency customer accounts should be grouped together and totaled to a new Total foreign currency AR (FX.AR) account.

These total accounts are synchronized periodically and the balances are used to calculate the foreign exchange for the period.

Five general accounts are added to the books, one for each main area that has foreign currency accounts.

a general Bank account to convert foreign currency bank balances.
a general AR account to convert foreign currency accounts receivable.
a general AP account to convert foreign currency accounts payable.
a general SALES account to convert foreign currency sales.
a general EXPENSE account to convert foreign currency expenses.

Two additional accounts are added to the books used to post the unrealized foreign exchange adjustment and the foreign exchange gain/loss expense.

a general CTA - Unrealized Foreign Exchange Adj. account in the equity section.
an expense Foreign Exchange Gain / Loss account at the bottom of the trial balance.

See the Accounts table below for the full details.

Two new reports are added with five total accounts. One for each foreign currency account group. These accounts are linked to the five posting accounts above.

Total foreign currency Bank account displaying the current balance to be converted, Unrealized FX.
Total foreign currency AR account displaying the current AR balance to be converted, Unrealized FX.
Total foreign currency AP account displaying the current AP balance to be converted, Unrealized FX.
Total foreign currency SALES account displaying the current sales to be converted, Realized FX.
Total foreign currency EXPENSE account displaying the current expenses to be converted, Realized FX.

If you never purchase goods in a foreign currency you do not need to add the foreign exchange AP and EXPENSE accounts. Alternately, additional grouping may be required depending on the complexity of your books. e.g. Inventory. Cost of Goods Sold, etc

Foreign Currency - Account Setup

The table below lists all the accounts that need to be added to the Trial Balance, or other appropriate financial reports. Please add the accounts while on the setup view of the account tables.

Posting accounts required for Foreign Exchange
Folder	Account Name	normal balance	normal rep.	Report	Description
general	1099	debit	perpetual	Balance Sheet	used to post the foreign exchange value bringing the foreign Bank balance in line with the domestic currency.
general	1299	debit	perpetual	Balance Sheet	used to post the foreign exchange value bringing the total outstanding foreign currency AR balance in line with the domestic currency.
general	2599	credit	perpetual	Balance Sheet	used to post the foreign exchange value bringing the total outstanding foreign currency AP balance in line with the domestic currency.
general	3380	credit	perpetual	Balance Sheet	the CTA (cumulative translation adjustment) unrealized foreign exchange adjustment account.
general	4199	credit	periodic	Income Statement	used to post the foreign exchange value bringing the total foreign currency SALES in line with the domestic currency.
general	6799	debit	periodic	Income Statement	used to post the foreign exchange value bringing the total foreign currency EXPENSES in line with the domestic currency.
expense	6800	debit	periodic	Income Statement	the foreign exchange expense/(gain) account.

Foreign Currency - Unrealized - Report Setup

Total accounts for the Foreign Exchange Unrealized Report
Folder	Account Name	normal balance	normal rep.	Description
total	FX.BANK	debit	perpetual	account displaying the current foreign currency bank balance to be converted.
total	FX.AR	debit	perpetual	account displaying the current foreign currency AR balance to be converted.
total	FX.AP	credit	perpetual	account displaying the current foreign currency AP balance to be converted.

Foreign Currency - Realized - Report Setup

Total accounts for the Foreign Exchange Realized Report
Folder	Account Name	normal balance	normal rep.	Description
total	FX.SALES	credit	periodic	account displaying the current foreign currency sales to be converted.
total	FX.EXPENSE	debit	periodic	account displaying the current foreign currency expenses to be converted.