Hi @mauroskov, It’s likely to be a cumulative figure since the first is coming from a Profit and Loss or a similar report and the second is from the Balance Sheet or a similar report, but we can’t tell for sure unless we know the source reports as well as the dates set for each report.
That’s a reasonable request, however, Foreign Currency accounting is undergoing changes at the moment, so adding to the current guide might add to the confusion as things change, instead of clearing the confusion.
But basically, the Foreign Exchange Revaluation account is the account used to record the discrepancy amount when a Foreign Currency outstanding position has been revalued in a financial account such as Bank and Cash Accounts, Customers, Suppliers, Employees, Expense Claim Payers and Special Accounts.
Let’s take – for example – the case of a UK based merchant importing a Fixed Asset from the USA and paying for it in USD. The Base Currency, in this case, is GBP.
Initially the invoice is recorded at the spot exchange rate of 0.8 GBP/USD and the Journal View for the Purchase Invoice should show something like this:
Suppose the supplier does not get paid as of 8/31/2023. Now the exchange rate changed to 0.7 GBP/USD. The currency revaluation will only affect the Financial Account which, in this case, is the Accounts payable part of the original transaction.
The $20,000 balance is now worth £14,000, however, the Machinery A Fixed Asset’s value will remain at £16,000. This creates a discrepancy in the books of £2,000 that has to be placed in some account in order to adhere to the double entry accounting – that account is the Foreign Exchange Revaluation account.
The following table illustrates how the discrepancy originates:
| Account |
Original balance |
Balance after revaluation |
| Fixed assets, at cost |
£16,000 Dr |
£16,000 Dr |
| Accounts payable |
£16,000 Cr |
£14,000 Cr |
| Discrepancy |
– |
£2,000 Dr |
That difference will remain in Foreign Exchange Revaluation account until the original balance is finally realized in the Base Currency – i.e. paid for in GBP, such that no financial asset or liability stated in USD remain in the books.
Manager does not account for each individual transaction since that would require numerous calculations to be performed for each report at each set of dates used – which will hinder performance. Instead, Manager calculates the discrepancy for the entire account balance which works out to exactly the same discrepancy amount as when calculated for each transaction individually.
This is why you will not be able to get the breakdown for your Foreign Exchange Revaluation account.
