Forex Loss on Profit and Loss Statement


How is the Forex Profit and Loss calculated?

I am currently showing a loss in my Profit and Loss Statement. I used a rate of 1 AUD = 0.75 USD

Would you recommend setting a rate at the start of the year and using that rate throughout the 12 months?

When would you then calculate the profit and loss of the Forex and would one just use the closing Forex rate on the last business day of the year?

Thank you for your assistance.

I think you should be setting an exchange rate at the date of each transaction
When you receive an invoice - you would use the exchange rate for that date.
When you pay the invoice - you would use the exchange rate used .
The difference between the two would become your forex gain/loss

Setting an annual rate could cause your products to be negatively costed if there were large negative fluctuations in rates

Thanks for the suggestion Brucanna.

I should also add that when we receive the funds our bank account keeps them in AUD and does not convert them into USD. We only convert the AUD to USD as and when we need it.

Would this factor change your comments above?

Thanks for your input.

If you have both AUD & USD denomination accounts with the bank then I think you should maintain both AUD & USD denomination bank accounts in Manager - then the transactions remain within their denomination