Foreign Exchange Loss
Also called: Exchange Loss
Loss when a dollar or euro invoice is settled at a worse rupee rate than when booked, on the Profit and Loss statement.
In detail
Foreign Exchange Loss is the cost of the rupee moving against the company between booking a foreign currency transaction and settling it. A USD hotel bill is recorded in Creditors at the Nepal Rastra Bank rate on the invoice date; if the rupee has weakened when the bill is paid, more rupees go out than were booked and the difference is debited here. BRAccount computes the difference automatically in the Payment Entry when the rate on payment differs from the invoice, and the Exchange Rate Revaluation tool posts unrealised losses on open balances at a period end. Realised losses are deductible for income tax; unrealised ones generally are not until settled. Transfer fees go to Bank Charges.
Formula
Loss = Foreign amount x (Settlement rate - Booking rate) when the rupee has weakened against the company
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Creditors (hotel) | Rs 1,34,000 | |
| Foreign Exchange Loss | Rs 1,500 | |
| Bank Account | Rs 1,35,500 |
How to record it in BRAccount
- 01Post the supplier's bill in USD with Buying > Purchase Invoice at the invoice date rate.
- 02When paying, go to Payments > Payment Entry > New, choose Pay and the supplier.
- 03Enter the USD amount, the bank account and the rate the bank actually charged.
- 04Allocate the invoice; the difference appears as exchange gain or loss.
- 05Submit. The entry below posts with the loss debited 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 Creditors Rs 1,34,000, Dr Foreign Exchange Loss Rs 1,500, Cr Bank Account Rs 1,35,500 paying a USD 1,000 hotel bill at Rs 135.50.