Help with Profit & Unrealized Gain
Windymotto1111
Member Posts: 1
Hi, Admin.
Good day.
We have met an issue which can not be solved by ourselves.
This is the second year of the company.
The first-year Profit of the company is 8,000, and with Unrealized Gain on Foreign Exchange 35.
When I checked the Balance Sheet for the second year, I found that the profit for all prior years(only the first year) was changed to 7,965. The balance between the profit on P&L of first-year and profit for all prior years on Balance Sheet of second-year is 35 which matches the Unrealized Gain on Foreign Exchange.
Can you help to suggest how to solve the difference?
Looking forward to your reply. Thanks a lot.
0
Comments
Hi @Windymotto1111 !
It looks like this difference is caused by how Unrealized gains and losses on foreign exchange work in Wave. These accounts appear in two places: as an asset (gain) or liability (loss) account, and as a revenue (gain) or expense (loss) account. The revenue and expense accounts are included in the calculation of profit for the year, which also appears on the balance sheet in the equity section.
If there is unrealized gain or loss on bills or invoices at the end of the year, and the bills or invoices are paid in the following year, then the realized amount of gain or loss is recorded on the date of the payment, and is recorded to the gain on foreign exchange or loss on foreign exchange account. Once that occurs, any outstanding unrealized gain or loss in prior years is zeroed out. One side of the difference is in the profits from prior years line item, and the other is the unrealized gain asset account or unrealized loss liability account.
This means that the Balance Sheet recalculates the profit from all prior years without the unrealized gain or loss amount, as it has been recognized in the current year. So the profit is lower by the amount of gain or loss.
If you change your reports to Cash Basis, you can view the profit without the unrealized loss/gain appearing!
Hi @KiahD
I'm new to this, I will reread your post to figure this out. So far I don't know where my numbers come from for "Unrealized Gain on Foreign Exchange" so if you can explain what it is in the first place (sorry if I don't understand what you wrote already, Engish is not my first language and new to how this is all categorized, reported, etc).
Any chance you can get me to understand this?
Thanks