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Multi-Currency Postings CAPITAL GL Controller is able to maintain the balances of postings to account codes in your business' base currency and in other currencies, based on the currencies used in your transactions. The system's 'multi-dimensional ledger' structure permits you to track these balances separately. This can be useful when you wish to know the balance of an account (or the applicable portion of that balance) in Yen, US dollars, UK pounds, or whatever currency you need track, as per the end of the reporting period (rather than as at the time the transaction was entered). This then permits the easy calculation of 'unrealized' foreign currency gain or loss for the financial period.
1st of June, US $1000 / .75 = (base currency) $1333.33 Debit Purchases $1333.33 Credit Trade Creditors $1333.33 If the transaction was then paid two months later, at which point the exchange rate may have changed, then there would be a 'realized' profit or loss. If the exchange rate at the time of payment of the account was .73 then the payment transaction would be: 1st of August, US$1000 / .73 = (base currency) $1369.86 Credit Bank $1369.86 Debit Trade Creditors $1333.33 Debit Exchange Loss $36.53 In this case the transaction is finalized and the profit or loss caused by exchange rate movement is determined and taken into account in the general ledger, by appropriate postings to the bank, trade creditors and exchange profit or loss accounts. On the other hand, an 'unrealized' foreign exchange gain or loss is the calculation of the effect of foreign exchange movement before transactions have been finalized. This might be calculated for the end of a financial period or for the end of the financial year. This can be useful for specific accounting purposes or for reporting balances outstanding as per a particular period in time, for foreign subsidiary reporting. Hints & Tips
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A 'realized' profit or loss occurs when a
transaction's balance owing or owed is finalized. For example,
imagine you purchased goods to the value of US $1000 dollars at the
exchange rate of .75 of your base currency as per the first day of
the month: