Exchange Valuation Transactions


The exchange rate is the value of foreign currency units in terms of national currency. When we buy securities, fixtures in foreign currency, or give and receive various timed appropriations in our companies, a foreign exchange difference may occur between the document date and the transaction date. Exchange difference is the increase or decrease in the value of our national currency against foreign currencies. Exchange differences resulting from such transactions should be reflected in the income and expense accounts.


Warning: In order to perform Exchange Valuation Transactions on Workcube, first of all,

You must complete the Exchange Valuation Transactions definitions via the BPM > Transaction Categories page.

For Exchange Valuation Transactions:

  1. Receivable Currency Valuation Receipt,
  2. Debt Currency Valuation Receipt,
  3. Bank Exchange Rate Valuation Transaction,
  4. Cash Account Exchange Rate Valuation, definitions should be made.


Exchange Currency Valuation Screen, Accounting and Operational Logic

The foreign currency in our Cash Account and our Bank is valued at the effective exchange rate of the Central Bank and the differences are accounted for in accordance with local regulations.

If we give + exchange rate difference on the date of the transaction we value, the relevant transaction foreign currency will be debited to our cash account and credited to our foreign exchange profits account.

For example, on 01/08/2020, there is a foreign currency worth 1000 USD. (Currency Difference in TL: 6.96)

If the foreign currency in my cash account is valued at 7.35 USD on 27/08/2020, the exchange rate difference of 7,359.10 - 6,960,20 = 398,90 TL will be recorded in the 646 Foreign Exchange Gains account.

  1. Transaction Date: This is the field where you select the transaction date to make the valuation.
  2. According to the date you select the transaction date, exchange information is automatically obtained and exchange rate valuation is done automatically.
  3. It is the field that displays the exchange rate difference between the date the Debt or Credit occurs and the date on which you evaluate the exchange rate by selecting the transaction date.

Warning!

An increase or decrease in the exchange rate does not change the credit and debt amount of the transaction currency. Currency Valuation is made over the System Currency.

When you click the Save button and save, it creates a new record on the Cash Account Transactions page and assigns a record to the Foreign Exchange Gains/Losses accounts according to the exchange rate difference.

Cash Account Exchange Valuation and Bank Exchange Rate Valuation transactions are processed directly in the accounting records.

Tip: Entering the information from which currency the valuation process was made in the Explanation field on the Cash Account and Bank Exchange Rate Valuation Screens will facilitate the tracking of your records.


Accounting Record

As a result of the valuation process, the amount equal to the valuation value is debited from the cash account, and the foreign exchange profit is recorded as a credit to the account 646 Foreign Exchange Profits.

Current Exchange Rate Valuation Transactions

The balance of debt/credit of current accounts gives the balance of the relevant current account.

(Debt-Credit=Balance). When we make monetary transactions in foreign currency with any current account, we update the USD balance by valuing the exchange rate difference that will occur.

For example, X firm invoiced Z firm for 10.000$ including VAT on 01/08/2020 and in return received 10,000$ payment from Z firm on 15/08/2020. In this situation;

Date
Transaction Type
Amount
Exchange Rate
Amount
01/08/2020
Sales Invoice
10.000 USD
7.00
70.000 TL
15/08/2020
Collection
10.000 USD
7.15
71.500 TL



BALANCE=-1500 TL

As a result of the exchange rate valuation, a 1500 TL Debt increase occurs in the current statement of firm Z and its balance is updated.

In this case, firm X has to issue a foreign exchange invoice of 1500 TL to firm Z. You can add a receipt for the difference, and at the same time, you can issue a foreign exchange invoice.

Warning: After the exchange rate valuation, the party giving the surplus in the TL account issues the foreign exchange invoice. In this example, since the Seller received payment more than the invoice amount issued by Company X, it became necessary to issue a foreign exchange invoice including VAT.

Tip: There is no need to issue a foreign exchange invoice for period-end tax calculations. The foreign exchange invoice is a correction. It is deducted for the correct accrual of the taxes to be paid (VAT and Income Tax) related to the relevant invoice. Differences in the period-end exchange rate valuation are recorded in the foreign exchange income accounts if "+", and in the foreign exchange expense accounts if "-".

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