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Foreign exchange gains and losses in foreign currency bank accounts

SystemSystem Posts: 412 admin

imageForeign exchange gains and losses in foreign currency bank accounts

If your business holds funds in foreign currency bank accounts, you're aware that foreign exchange rates sometimes move in your favour, and sometimes they go against you.
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edited January 16, 2019 in Help Center Discussion

Comments

  • mrl14mrl14 Member Posts: 4

    What if you don't move your money back to your home currency? What if you maintain multiple currency accounts and have expenses in both currencies. What if you only adjust for foreign gain/loss upon filing?? STOP FORCING ME TO OPERATE THE WAY YOU THINK I SHOULD OPERATE. It's extremely frustrating and I cannot get my accounts to reconcile because you keep converting the amount at some rate I can't even control!

  • kubasoltysiakkubasoltysiak Member Posts: 1

    I am confused by this as well - it seems to me this should be pretty simple. I have a Canadian Dollar (CAD) and US Dollar (USD) bank account. My accounting currency is USD. Two months ago, I transferred funds into the Canadian Dollar account (no income statement impact, just moving between balance sheet items). Straightforward to this point. My year-end is a calendar year end so Dec 31st, 2018. Unfortunately the Canadian Dollar has weakened relative to the US dollar in the two months since I've put the money there, and it's time now to complete my year-end financial statements as well as file taxes, all in US dollars. Since my balance sheet is presented in US dollars, I would expect the balance in the cash account on the balance sheet now to be lower (those CADs are worth fewer USDs), and I would expect there to be an unrealized loss on foreign exchange on my income statement. I see zero loss on foreign exchange though, and my cash balance sheet account also hasn't changed. Am I missing something? How do I properly make the entries to adjust these accounts?

  • Louisa_SLouisa_S Member Posts: 3

    you need to correct the system about Forex accounting.
    But in my case I had unrealised losses remained in my foreign currency account (USD is the functional currency). And after doing the manual journal transaction - I ended up with Negative balance in foreign currency, but zero balance in USD. This is incorrect. (sorry I can't post here the screenshot)

    You need to implement automatic recalculation of balances denominated in foreign currency, that way the system would only correct the foreign balances and recognize the differences as loss/gain in P/L.

  • Louisa_SLouisa_S Member Posts: 3

    And after doing the manual journal entry - you cannot reconcile the bank account with the actual bank statement balance. Have you looked it?

  • sunnyt713sunnyt713 Member Posts: 7

    This isn't working properly for me either.

    • My base currency is CAD
    • Jan 1 I invoice for $100 USD, worth let's say $1.30 CAD
    • The invoice gets paid Feb 1, in USD to my USD bank account
    • However, on Feb 1 when the invoice was paid, the $100 USD is now only worth $1.25 CAD.
    • Wave should be accounting for the $5 foreign exchange loss, but it isn't showing any loss
      I ran this example through Quickbooks, and it shows the $5 loss.
  • sunnyt713sunnyt713 Member Posts: 7

    Here's an example of how Wave is handling it vs. Quickbooks Online (just the dates and amounts are slightly different, but same thing going on).

    Wave:

    QBO:

  • TomiTomi Member Posts: 4

    This is a very important topic, why is it blank?

  • JamieDJamieD Administrator Posts: 1,156 admin

    @Tomi More than likely, the reason you are seeing this as a blank help centre article is based on the fact that this only pertains to our users on the legacy software, which wouldn't be available to you on the most recently updated software based on different workflows.

    Also, I did want to touch base on a few things that might have been missed here. All reports will always generate in the base currency of a business, regardless of the type of accounts that you set up in the Chart of Accounts (different currency accounts etc). As a result of this, an exchange will apply to any of the foreign exchange transactions that are recorded, etc. One other thing I would like to point out is that foreign exchange is well known for being a bit difficult to get exactly right, since it changes on a daily basis (and we pull data from www.xe.com).

  • mgmmgm Member Posts: 1

    Throughout the year the dollar fluctuates as i pay bills and get paid, at the end of the year when I am running my balance sheet I would like to use the rate for the date that I choose, to value my FE accounts in local (default) currency, how can I do this?

  • BarsinBarsin Member, Moderator Posts: 2,041 ✭✭✭

    Hey there @mgm

    So our system uses a real-time update for foreign exchange from the website https://www.xe.com/.
    This would mean that throughout the fiscal year your figures would change, since we are a cloud based service. You would need to manually adjust the transactions on an individual level rather than setting up the account to read a one time forex reading.

    Hope this makes sense. Don't hesitate to reach out if you need anything else!

    • Barsin
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