US Dollar Bank Account - YE exch adjustment from Accountant and effect on bank reconciliation

Question

Hi there, 
 We opened a US Dollar bank account (at our Canadian bank) this past year. Our year-end was July 31st. I just completed the Year End Adjustments from our accountant last week. One was for adjusting the USD account for an exchange gain as of the Bank of Canada's spot rate on July 31st. 
 I went to complete the bank reconciliation today and that exchange gain entry is sitting there. When I check off everything else on my bank statement, it is sitting as "outstanding" (not a discrepancy). 
 Is there anyway to fix this or will it just show up all year as Outstanding? 
 Thanks in advance for your help, 
 Marcie

RandyW · Accepted Answer

MarcieD said: USD Bank $400.00 Credit, Accounts Receivable $2200 Credit, Foreign Exchange Loss $2600 Debit. 
 Hi, 
 Because the only way(s) to post to the linked A/R account are through the Invoice screen or the Receipts screen, it's only possible to make the A/R portion of the above foreign currency adjustment by using the invoice screen. 
 Adjustments to A/R can be done in a similar way to how you would make the adjustments to the bank account through the G/L. Create a USD customer just for adjustments: 
 1. sell -$1.00 on one line item to the Foreign Exchange Loss account @ an exchange rate of 2201.0000, then 
 2. sell $1.00 to the Foreign Exchange Loss account at an exchange rate of 1.0000. 
 It's also possible to sort of reverse, then re-add the entire foreign A/R balance, as above, but for example -10,000 @ 1.50 to adjust the entire balance out, then +10,000 @ 1.28 to add the entire balance in. The Foreign Exchange Loss account will have a credit of $15,000 and a debit of $12,800 to get the net amount in. 
 Check the journal entries carefully. Step 1 will credit A/R $1.00 in the foreign currency, but $2201 in the home currency. Step 2 will debit A/R $1.00 in both currencies. 
 But... I don't do it that way. 
 I set up an additional G/L account right after 1200 Accounts Receivable for the purpose of posting that adjustment as a regular G/L transaction. I also added a subtotal account after that for total trade receivables. 
 Of course, even easier is asking your accountants whether this amount is to be adjusted, or was simply intended for their internal working papers and the financial statement presentation and tax return.

RandyW · Answer

MarcieD said: I just completed the Year End Adjustments from our accountant last week. One was for adjusting the USD account for an exchange gain as of the Bank of Canada's spot rate on July 31st. 
 Because foreign accounts are sort of a 2-in-1 (a CAD / 'Home Currency' account and the USD account) The recommended procedure from Sage for adjusting the CAD (home Currency) value in a Foreign Currency account, is to enter two transactions of $1.00 each: 
 If you need to increase the CAD value of your US account by $100 (for example, your CAD book value of the USD is $1000 CAD and the quantity of USD you have on the books is worth $1,100 CAD at the end of the period ): 
 First 
 Debit USD Bank $1.00; Credit Foreign Exchange gain / loss $1.00. Use an exchange rate of USD:CAD of 101.000000. Post, don't update the exchange rate . 
 This adds $101.00 to the CAD balance, and $1.00 to the USD balance 
 Second 
 Debit Foreign Exchange Gain / Loss $1.00; Credit USD Bank $1.00; Use an exchange rate of USD:CAD of 1.000000 Post, don't update the exchange rate . 
 This subtracts $1.00 from the CAD balance, and $1.00 from the USD balance. 
 So finally: 
 What you're left with is a net CAD bank transaction debit $100.00 ($101.00-1.00). The USD balance has had $1.00 debited and then $1.00 credited, so it's back to the same balance. 
 And the foreign exchange gain / loss has been credited $101.00 then debited $1.00, so it's had a net $100 credit entry. 
 I didn't show the USD book balance above and the current exchange rate, because you only need those numbers to calculate how much to adjust the home currency value in CAD. 
 MarcieD said: Is there anyway to fix this or will it just show up all year as Outstanding? 
 Open reconciliation items will show up until the end of time, unless it's cleared. 
 There should be two equal and opposite transactions to clear against each other on the reconciliation. If that's not what's on your reconciliation, you need to correct the posting of the foreign currency adjustment as above. 
 I hope that helps, please post back!

Sage 50 Canada

US Dollar Bank Account - YE exch adjustment from Accountant and effect on bank reconciliation

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