What is the journal entry to record a foreign exchange transaction loss?
A foreign exchange transaction loss occurs when the transaction currency is different than the reporting currency for the company. On the initial transaction date, they would record the $100 sale with a debit to accounts receivable and a credit to revenue.
However, 30 days later when the customer goes to pay using the current exchange rate, the decline means that the company will only collect $95 instead of $100, which represents a loss. To record the foreign exchange transaction loss, the company would debit cash for $95, debit foreign exchange loss for $5 (expense), and then credit accounts receivable for $100.
If you are studying for the CPA exam, then sign up for a free trial to have full access to the Universal CPA platform for 7 days here. Universal CPA is the only course that has visual learning and bite-sized video explanations for every single MCQ and simulation.
To learn more about the Universal CPA course and see a demo of the course, visit this link.
Back To All Questions
You might also be interested in...
-
What is the journal entry to record a foreign exchange transaction gain?
A foreign exchange transaction gain occurs when the transaction currency is different than the reporting currency for the company. On the initial transaction date, they would record the $100 sale with a debit to accounts receivable and a credit to revenue. However, 30 days later when the customer goes to pay using the current exchange...
-
What is the difference between a foreign currency transaction and foreign currency remeasurement/translation?
The key difference is that a foreign currency transaction is when the company transacts with an unaffiliated 3rd party. Foreign currency remeasurement/translation occurs internally between the parent and subsidiaries.
What is the journal entry to record a foreign exchange transaction gain?
A foreign exchange transaction gain occurs when the transaction currency is different than the reporting currency for the company. On the initial transaction date, they would record the $100 sale with a debit to accounts receivable and a credit to revenue. However, 30 days later when the customer goes to pay using the current exchange...
What is the difference between a foreign currency transaction and foreign currency remeasurement/translation?
The key difference is that a foreign currency transaction is when the company transacts with an unaffiliated 3rd party. Foreign currency remeasurement/translation occurs internally between the parent and subsidiaries.
