Tag Archives: Home Currency Adjustment

Year-end home currency revaluation

Software: Intuit QuickBooks accounting software

Home Currency Revaluation is a task which you have to do during financial year-end closing. It revalues the foreign currency bank balances and any outstanding foreign currency’s receivable and payable.

You should not record any more foreign currency transactions in the year-end closing period once revaluation has done.

The home currency revaluation process includes:
– Set the year-end closing exchange rate
– Print a Unrealised Gains and Losses report
– Process home currency adjustment
– Reverse the home currency adjustment journal on the following period.

The Unrealised Gains and Losses report is in the Company & Financial, a sub-menu of the Reports menu. This report shows the gains and losses of each foreign currency account and will use as a supporting document for the adjustment.

You can find the Home Currency Adjustment feature under the Manage Currency, a sub-menu of the Company menu. Set the adjustment date and change the exchange rate if required, then select the accounts/names (you can click the Select All button at the bottom to select all foreign currency accounts) and hit the Save & Close button to proceed with the home currency adjustment. An exchange journal will create automatically to debit/credit the foreign currency account and credit/debit the exchange gains/losses account.

QuickBooks Home Currency Adjustment

QuickBooks captures the realised exchange gains or losses when the payment or receipt of the outstanding bill or invoice has recorded; therefore, the unrealised exchange journal which created during the home currency revaluation has to reverse on the first day of the following period. QuickBooks Premier and Enterprise Desktop version have a Reverse feature which located at the top of the journal, just click the Reverse button of the exchange journal to reverse it.

Discuss with your accountant to find out more about home currency revaluation if you are not sure about it.

 

Was this a realized or unrealized exchange gain/loss?

During my QuickBooks demonstration, a lady asked me, ‘I have a US dollar bank account, I deposited US$10,000.00 into this account when the exchange rate was at 1.42 (Home currency was in Singapore dollar). This month, my exchange rate for US dollar against Singapore dollar was 1:1.38. So, how should I record the ‘realized’ exchange loss of S$400.00 in this case?’

I consider it as ‘unrealized’ exchange loss instead of ‘realized’ exchange loss; as the US$10,000.00 was still physically in the bank account. Unless, we physically withdraw out the amount from the US dollar bank account then it will be consider as realized exchange loss. Am I correct? Let me know if you think that I should consider it as a ‘realized’ exchange loss instead of ‘unrealized’ exchange loss.

If this were to be an unrealized exchange loss; then, how should I do a home currency adjustment in QuickBooks?

Home currency adjustment can be done via a General Journal Entry. For QuickBooks 2009/10 (Asia) version, go to Company menu, and select Make General Journal Entry function. 

From the Make General Journal Entry form, ‘check’ the check box for ‘Home Currency Adjustment’ which located at the bottom of the Make General Journal Form. Then, enter your Journal detail such as date, entry number and accounts to be debited or credited.

For this case, you can debit S$400.00 into Unrealized Exchange Gain/Loss account (Change this account to Realized Exchange Gain/Loss account, if you think that this exchange loss should be realized) and credit S$400.00 into US dollar bank account.