Recording a gain or loss on funds transferred to a foreign bank account is accomplished by the Company->Manage Currency->Home Currency Adjustment menu selection.
First, enter the Date for the currency adjustment and choose the Currency whose value you want to update. Click the Calculate Adjustment button to locate those balances potentially impacted by the changed exchange rate. Enter the updated exchange rate.
In this example, we started with an exchange rate of 1 British pound (GBP) = 1.705 US Dollars (USD). We’ll record a new exchange rate of 1 GBP = 1.905 USD. Click the Calculate Adjustment button a second time to calculate the exchange-related gain or loss based on the updated exchange rate. Select the balances to adjust based on the new exchange rate by placing a check mark to the left of each balance. If you need to better describe the adjustment, enter a Memo. Click the Save & Close or Save & New button to record the adjustment.
QuickBooks will post a General Journal entry to the Exchange Gain or Loss account in the amount of the adjustment.
See our related article for more information on transferring funds to a foreign bank account.
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My home currency is GBP. I have loaned one client USD 200,000/- on 1.1.2011 @ 1.34 and received 30.6.20122 @ 1.32 (all provisional figures). The client’s loan a/c in USD stands cancelled as we received back USD 200,000/-. However, when you take Trial Balance there is still balance in Home Currency shown in debit side of the client’s loan account. Please advise how I write off the balance from the client’s account. I am confused sincere there is no balance shown when you look at the account listing. Appreciate your help on this.
If you have a client in a foreign currency (which in your case is USD), and you make a loan in the foreign currency and receive full repayment in the same currency, the client’s balance should be 0 in that currency. Based on the exchange rates you provided, you received about 2261.41 GBP more in repayment because of the exchange rate change (from 1.34 to 1.32). This is an exchange gain, and QB should have calculated it for you automatically. Your balance sheet should show no receivable from this client after the repayment, so there should be nothing to write off. The exchange gain is normally in the “other income” section of your income statement and will be combined with your other exchange gains/losses.
Thank you for the great article. I am just wondering if we should do the same thing when transferring funds from a foreign currency account to home currency account. If yes, should we do it after the funds is transfered?
Cheers
Frank
Frank, the simple answer is no. See our article on home currency adjustments. These apply to converting foreign balances to your home currency. In your situation, you’ll transfer out a foreign balance, and at the end of the accounting period, record a home currency adjustment for the remaining balance that you didn’t transfer. In essence what you are doing is valuing your foreign assets in your home currency as of a financial statement date, because your financial statements are in your home currency. In this post, the gain or loss does not come from the transfer itself, because a transfer alone doesn’t involve a gain or loss. The gain or loss comes from the passage of time and the fact that the foreign balance has changed in value due to the fluctuation in exchange rates. A transfer of a foreign balance to a home currency means you are no longer holding that foreign balance, so there is no gain or loss to record.