Current accounting rules require that the balances of your foreign currency bank accounts are shown on the Balance Sheet at a fixed stated, exchange rate.
The Foreign Bank Revaluation option allows you to revalue the balance of your bank account using a new exchange rate. This displays:
- The current Balance of the bank account in the account's operating currency.
The Old balance. This is the current balance of the bank account in your base currency.
The Old rate. This is the effective exchange rate. It is calculated from the foreign currency balance and the base currency balance.If this balance is not as expected
This is calculated based on the transactions that have been posted to this account. If you have revalued the bank account before, i.e. at the end of the previous month, the old rate will be calculated based on the last revalued balance (using the specified exchange rate) plus the transactions entered since.
- The New rate. This is the current exchange rate, stored in the foreign currency exchange rate table in Accounting System Manager. If the currency is amendable, you can change this exchange rate here.
- The New balance. This is the calculated balance of the bank account, in your base currency, using the New rate.
Once saved, any currency gains or losses are posted to the nominal ledger accounts shown in the Transaction Details. These are the nominal ledger account specified for the bank account and the default nominal account specified for Exchange Differences.
The revaluation is calculated in the following way:
|1.||Foreign currency balance||=||
New base currency value.
|New exchange rate|
|2.||(Old base currency value) - (new base currency value)||=||exchange difference (gain or loss).|
You can revalue a bank account where the foreign currency balance of the account is zero, but the base currency balance has a value.
This sets the base currency balance of the account to zero. No Old rate is calculated. A nominal ledger adjustment is posted for the value of the base currency balance.
You can revalue a bank account where base currency balance of the account is zero, but the foreign currency balance has a value.
You specify a new exchange rate for the bank account. The base currency value of the account is calculated using the foreign currency balance and the new exchange rate. No Old rate is shown. A nominal ledger adjustment is posted.
Note: You cannot revalue a bank account if the foreign currency account balance and the base currency account balance are zero.
- A revaluation report is produced. This shows the balances of the bank account, the exchange rate used, and the nominal ledger adjustment that has been posted.
- The foreign currency account balance and the base currency account balance are adjusted.
- Any currency gains or losses are posted to the nominal account for the bank account and the default nominal account for Exchange Differences (in the Nominal Ledger).
To revalue your bank account
Open: Cash Book > Period End Routines > Foreign Bank Revaluation.
Select the Bank account that you want to revalue.
If the foreign currency balance of the account is zero, confirm that you also want to make the base currency value of the account, zero.
Enter the Revaluation date. This is the date the revaluation transaction is posted.
Note: The revaluation amount will be calculated using the current value of your bank account today, not the Revaluation date you enter here.
- If the currency is amendable, enter the New rate of exchange.
- To revalue the bank account, click Save.
The Exchange difference value is automatically calculated and displayed.