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During month-end closing process, balances of the following accounts (if they are GL accounts maintained in foreign currencies (other currencies than the accounting currency) are revalued by using the current (month-end date) exchange rates. For example, revaluation involves GL accounts in the following sections:
- The Cash and Cash Equivalents section of COA: cash and bank accounts, the PDCs Received account.
- The Trade and Other Current Receivables section of COA: the Current Trade Receivables from Customers account, the Deposits Paid to Suppliers account.
- The Trade and Other Current Payables section of COA: the Current Trade Payables and Deposits from Customers accounts.
- The Staff Settlements (Liability) section of COA: the Staff Salary Settlements and Unpaid Employee Business Expenses accounts, the PDCs Issued account.
- The Staff Settlements (Assets) section of COA: the Prepaid Employee Business Expenses account.
Example.
On June 30, the bank account had a balance of 23,000 EURO; the exchange rate with respect to the accounting currency (UAE Dirham) was 4.40. The balance in the accounting currency is 101,200 Dirham.
On July 10, the organization received a lump sum of 15,000 EURO for for a completed project. The exchange rate actual on July 10 was 4.42. The received sum in the accounting currency was recorded as 66300 66300Dirham. Current balance in the accounting currency becomes equal to 167500 Dirham.
During month-end closing process, the account balance is revalued in the accounting currency with the exchange rate of 4.45 in effect on July 30. The balance in the accounting currency is 169,100 Dirham.
The gain of 1600 Dirham is recorded. The gain is calculated as follows: (23000*0.05 + 15000*0.03) = 1600
169,100 - (167500) = 1600
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Revaluation of accounts in other COA sections and calculation of gains/losses are performed on per document (transaction) basis. Notice that document amounts in the accounting currency are recorded to GL account with all the related information. For example, for accounts in the Payable and Receivable sections of COA such information includes: Entity, Company, Contract, and Document. For accounts from other sections of COA, the related information depends on the COA section.
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