- Accounting for Equity Investments
- Accounting for Business Combinations
- Accounting for Mergers and Acquisitions (Noncontrolling Interest)
- Accounting for Impairments
- Accounting for M&A Consolidation Using Equity Method
- Consolidations with Cost Method And Equity Method
- Consolidation Accounting and Inter-corporate Transactions
- Consolidation Accounting and Inter-corporate Land Sales
- Consolidation Accounting and Inter-corporate Depreciable Asset Sales
- Preparing a Consolidate Cash Flow Statement
- Consolidation Accounting: Changes in Equity Ownership
- Accounting: Consolidations with Indirect Control
- Accounting: Consolidating Special Purpose Entities
- Accounting for Joint Arrangements
- Accounting: Deferred Income Taxes in Business Combinations
- Consolidation Accounting: Segment Reporting
- Accounting for Foreign Exchange Transactions
- Accounting for Foreign Exchange Transactions
- Consolidation Accounting: Foreign Currency Translation
Accounting for Foreign Exchange Transactions
In this article, you will learn about how to account for foreign currency transactions undertaken by the domestic company.
A foreign exchange transaction takes place when a domestic company (such as a company in the US) enters into a transaction with a buyer or seller in another country (such as UK) to buy or sell products or services and the payments for the transaction are in foreign currency (in this case pounds).
Let’s say the US company (whose records we are preparing), books an order to supply some goods to the UK company. We have the following details:
- The currency for the transaction is GBP.
- The functional currency of the US company is USD.
At the time of order:
- The total value of the order is GBP 75000.
- The exchange rate is 1 GBP = 1.33 USD.
At the time of settlement:
- The exchange rate is 1 GBP = 1.2 USD
The transaction will be recorded as follows:
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