FX loss
Asset
It's a foreign exchange gain or loss, so when you exchange currencies, you can either make a gain or a loss from it (profit or loss).
Unrealised foreign exchange gain and loss is moved through equity while realised gain and loss is charged to profit and loss.
other comprehensive income
foreign Exchange loss will be charged in P&l A/c
Yes, unrealised gain/ (loss) should be reversed in the following year to bring the balances to original/ historical amounts. Subsequently, at the time of settlement of a liability/ collection of a receivable, the actual/ realised gain/ (loss) is booked in the year in which it incurred. When you track unrealized gains and losses, you make an entry for the current month, then reverse the entry you made in the previous month. It's important that you remember to reverse the previous month's entry; if you don't, gain and loss amounts for future months will be inaccurate.
An exchange gain is when a company buys something one day at one rate of currency but then actually pays for what they bought a different day and the rate of currency is different and higher will cause an exchange gain. An exchange loss is when the rate of currency is lower when company actually pays for item and enters it in the books.
Foreign exchange gain or loss is audited as unrealized income on the balance sheet when it occurs. This gain or loss then becomes realized income once it is paid or settled.
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Unrealized foreign exchange gain or loss should be entered as Earnings Before Interests and Tax. To calculate, subtract operating expenses from operating revenue. Add any non-operating income for the total.
Asset Account (debit) Unrealized Gain/Loss on Investment (credit) This journal entry is increasing your asset but at the same time putting the funds it has been increased into a "holding" account until the gains/losses can be realized. When the asset matures or sells you make an entry to realize the gain/loss which have now become taxable income. Unrealized Gain/Loss on Investment (debit) Interest Income; Realized Gain/Loss (credit) You will also need an JE to account for what is happening with the asset. Cash (debit) (unless you are going to roll over the asset. If that's the case keep amount rolling over in asset account.) Asset Account (credit)
dr a/d---xxx dr loss --xxx dr cash--xxx cr---equipment xxx (If at a loss; if sold at a gain then credit gain on disposal)
If you want to record the transaction before satisfactory performance, you would use the prevailing exchange rate on the date of entry. Any change in the rate that occured as of the actual date that the payment is made would be posted as an exchange rate gain/loss. If you wanted to avoid any exchange rate gain or loss, you could purchase all of the foreign currency today (or a forward exchange contract where you agree to buy the currency on a specific date at a specific rate) and post the total actual cost.