The discussion below provides an example relating to US Dollar (USD) transactions; however, the calculations are similar with other non-domestic funds transactions. Only the exchange rates differ.
MAKE A SALE TO A U.S. CUSTOMER
Let’s make a $1,000 sale, for example, with a standard exchange rate of 1.38.
Accounts Receivable 1000.00
Currency Exchange 380.00
Cost of Goods Sold 600.00
Note that the sales are converted to Canadian dollars. The conversion of the revenue inventory and cost of goods accounts accomplishes proper accounting for the entry as well as ensuring that the profit margin is reported correctly.
Less C of G (600.00)
When the A/R ledger is printed, it shows the individual invoice in the funds they were sold in: in this case U.S. funds. This method allows you to view the A/R and print statements in the correct funds. When the A/R is printed, a conversion value is shown on the A/R […]