Foreign Exchange Gain
Also called: Exchange Gain
Profit when a dollar or euro invoice is settled at a better rupee rate than when booked, on the Profit and Loss statement.
In detail
Foreign Exchange Gain arises when a transaction in a foreign currency is settled or revalued at a better rate than the one used when it was first booked. A USD invoice to a foreign tour operator is recorded at the rate on the invoice date; if the rupee has weakened by the time the money arrives, more rupees are received than were booked in Debtors and the difference is credited here. BRAccount computes it automatically in the Payment Entry when the exchange rate differs, and the Exchange Rate Revaluation tool posts unrealised gains at a period end. Nepal Rastra Bank publishes the daily rates. Unrealised gains are taxable only when realised, so the auditor keeps the two apart.
Formula
Gain = Foreign amount x (Settlement rate - Booking rate) when the settlement rate favours the company
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Bank Account | Rs 1,36,000 | |
| Debtors | Rs 1,34,000 | |
| Foreign Exchange Gain | Rs 2,000 |
How to record it in BRAccount
- 01Raise the Sales Invoice in USD with the Nepal Rastra Bank rate of the invoice date.
- 02When the money arrives, go to Payments > Payment Entry > New, choose Receive and the customer.
- 03Enter the USD amount, the bank account and the rate at which the bank converted it.
- 04Allocate the invoice; the difference shows as exchange gain or loss on the entry.
- 05Submit. The entry below posts with the gain credited automatically.
- 06At period end, search Exchange Rate Revaluation in the search bar to post unrealised differences on open balances.
When to use it
Posted automatically by Payment Entry on foreign currency invoices, and by the year-end Exchange Rate Revaluation.
Example from the demo books
Dr Bank Account Rs 1,36,000, Cr Debtors Rs 1,34,000, Cr Foreign Exchange Gain Rs 2,000 when a USD 1,000 invoice is collected at Rs 136.