...
On January 1st Company A, which is based in the United States, sells 10 widgets to Company B whose preferred currency is euros (€). The amount of the transaction is €1050. The exchange rate value of €1.05/1 US U.S. dollar makes the US U.S. dollar value of the transaction $1000. Company A extends a 30-day credit policy to Company B, and Company B makes a payment of €1050 on January 30th. During that time, the exchange rate between US U.S. dollars and euros changed resulting in a loss on this transaction. The exchange rates of the currencies are displayed in the following table.
Date | US U.S. Dollar ($) | Euro (€) |
January 1 | 1 | 1.05 |
January 30 | 1 | 1.08 |
...
The two-transaction perspective considers the sale and collection of payments as two separate and distinct transactions.
Order GL Entries
Shipped Date | Account | Debit | Credit |
January 1 | Accounts Receivable | USD 1,000.00 |
|
January 1 | Sales |
| USD 1,000.00 |
...