Saturday, March 10, 2012

The difference between Unrealized gain (loss) foreign exchange and Realized gain (loss) foreign exchange

In this article, I will explain about the difference between realized and unrealized gain or loss based on my knowledge and my practice experience, because this is my opinion, so the explaination not 100% true,,hehehe 

Explain unrealized 1st :
Based on my knowledge, unrealized gain or loss on foreign currency is foreign exchange which are appears from adjustment of monetaries account using closing rate / rate at reporting date in every end of period (usually the most entity using BI middle rate for base rate). monetaries account as trade account receivable, other account receivable, trade account payable, other account payable, accrue expense, substantially all of the accounts that realization in the future in the form of cash in or cash out. Then how about purchase advance payment / sales advance payment? can it be a monetary account or non-monetary account? In my opinion, purchase advance payment/sales advance payment is non-monetary account, because in the future, purchase advance payment/sales advance payment will be deducted on trade account payable/trade account receivable and not in form of cash in or cash out.

ok, then back again to the main topic, unrealized gain or loss on foreign currency, so the foreign exchange appears from adjustment monetaries account in every end of period such as trade account receivable, other account receivable, trade account payable, other account payable, accrue expense included in unrealized foreign currency

Then,,,what is realized foreign currency???
I explained using illustration, to make it simple. For example we have trade account receivable in US Dollars (foreign currency), account receivable when sales recorded is $ 500,000 (rate $1 = Rp 8,000) ~ equivalent with Rp 4,000,000,000. Then when the customer paid it, amounted to $ 500,000, prevailing rate is $1 = Rp 8,500, so the Rp amount recorded is Rp 4,250,000,000.... so there is a difference amount in account receivable amounted to Rp 250,000,000 whereas if we see in original amount, the trade account receivable already paid off and there is no outstanding amount. Nah,,, the difference amount Rp 250,000,000 is a foreign exchange. We named it as realized loss in foreign exchange.

ok dehh,,,its time to take a bed, so i will end up my explaination... next time we continue again yaaa,,,,thaaa,,,,:)

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