Realized Gain and Loss transactions are automatically calculated when customer payments are applied to open invoices.
Realized Gain and Loss transactions reflect the change in the base currency value of foreign currency transactions resulting from exchange rate fluctuations between invoice and payment time.
For example, you enter Invoice # 500100 with the following currency information:
• Company Base Currency is U.S. Dollars (Currency ID = USD)
• Invoice # 500100 is entered for 500 Euros (Currency ID = EUR)
• The U.S. dollar value of Invoice # 500100 is 550.00, using a EUR to USD exchange rate of 1.10 effective on the invoice date of 11/01/2005.
A payment of 500 EUR for the invoice is received on 12/15/2005 and the EUR to USD exchange rate is 1.15.
The U.S. dollar value of 500 EUR on 12/15/2005 is 575.00.
Therefore when the payment is applied to the invoice, a Realized Gain of 25.00 U.S Dollars will be posted to the Realized Gain Account and Class setup in the Currency List screen for the EUR Currency ID. The offsetting amount will be posted to the Customer AR Account.