• The foreign balance is correct, but the CAD balance is incorrect
• Canadian balance wrong, US balance is correct
• The CAD balance for my USD bank account does not match the USD balance
• The CAD balance for my USD bank account is incorrect

• You could have this situation due to the fluctuation of the foreign currency exchange rates.
• This fluctuation may create a gain or a loss for your company, and you should periodically adjust your bank account balance in order to recognize this gain or loss.

This article assumes the following:

• The home currency is in CAD (Canadian dollars)
• The account is in USD (US dollars)

Two journal entries are needed in order to adjust the CAD balance for the USD bank account:

1. Find the difference between the current balance (in CAD$) and the desired balance (in CAD$).
2. (entry 1) Open the general journal (or miscellaneous transactions) window.
3. Select the Currency Code “USD”.
4. Enter the first entry:
   • If the current CAD balance is too low:
     1. Debit the US$ account by $1
     2. Credit the Exchange and rounding account for a $1.
   • If the current CAD balance is too high:
     1. Credit the US$ account by $1
     2. Debit the Exchange and rounding account for a $1.
5. In the Exchange Rate field (or box), enter in the difference between the desired CAD balance and current balance plus 1.
6. Post the entry and check your statements.
7. (entry 2) Open the general journal (or miscellaneous transactions) window.
8. In the Exchange Rate field, enter 1.
9. Enter the exact reverse than the first entry.
10. Post the 2nd entry.

Example I: when the current CAD balance is too low:

Your USD bank account shows these balances:

• USD balance: $1000 (Dr)
• CAD balance: -$400 (Cr)

But you want to have the CAD balance as $1100 as per an exchange rate of 1.1.

Entry 1:
Exchange rate = (Desired balance – Current Balance) + 1 = (1100 – (-400)) + 1 = 1501

Debit the US Bank Account by USD$1, Credit the Foreign Currency Exchange Gain or Loss account:

The journal entry is:

	Foreign Amount	Debits	Credits
US Bank account	US$ 1.00	1501.00
Foreign Currency Exchange Gain/Loss account	US$ 1.00		1501.00

Entry 2:
Exchange rate = 1
Credit the US Bank Account by USD$1 and Debit the Foreign Currency Exchange Gain or Loss account:

The journal entry is:

	Foreign Amount	Debits	Credits
US Bank account	US$ 1.00		1.00
Foreign Currency Exchange Gain/Loss account	US$ 1.00	1.00

These two entries will increase the CAD equivalent balance to the correct amount $1100, and leave the USD balance as $1000.

Example II: when the current CAD balance is too high:

Your USD bank account shows these balances:

• USD balance: $1000 (Dr)
• CAD balance: $1400 (Dr)

But you want to have the CAD balance as $1100 as per an exchange rate of 1.1.

Entry 1:
Exchange rate = (Current Balance – Desired Balance) + 1 = (1400 – 1100) + 1 = 301

Credit the US Bank Account by USD$1 and Debit the Foreign Currency Exchange Gain or Loss account:

The journal entry is:

	Foreign Amount	Debits	Credits
US Bank account	US$ 1.00		301.00
Foreign Currency Exchange Gain/Loss account	US$ 1.00	301.00

Entry 2:
Exchange rate = 1

Debit the US Bank Account by USD$1 and Credit the Foreign Currency Exchange Gain or Loss account:

The journal entry is:

	Foreign Amount	Debits	Credits
US Bank account	US$ 1.00	1.00
Foreign Currency Exchange Gain/Loss account	US$ 1.00		1.00

These two entries will bring the CAD equivalent balance down to the correct amount $1100, and leave the USD balance as $1000.

If the resulting exercise posts a large amount to the Exchange and Rounding Expense account and distorts the expense or income for the year. Consult with your Accountant you may want to adjust this amount to prior years.

Sage 50 Accounting does not automatically calculate Foreign Exchange Losses and Gains when posting between Bank accounts. You must take into account any gain or losses on exchange rates over your fiscal year. The program does automatically calculate exchange losses and gains when posting receipts and payments.

Notes: If your AR and AP accounts have Foreign Exchange discrepancies then call tech support for further information. Do not unlink the accounts to make a journal entry to correct.