Hello,

Hoping someone can help me to understand the exchange gain/loss that is created (by journal entry) as a result of performing a currency re-valuation.

In my case, the home currency is CAD and I typically revalue USD to CAD on the last day of my fiscal year. Prior to running this revaluation, transactions are automatically created in the Exchange Gain/Loss account each time I receive payment in USD. For example, on March 15, 2022, I invoiced a customer for $2550 USD at an Fx of 1.281148 representing $3266.93 CAD. On March 24, 2022, I received full payment at an FX of $1.253274 representing $3195.85 CAD. The Exchange Gain/Loss account was automatically debited for $71.06 representing a realized loss. At the end of the fiscal year (before running currency revaluation), the balance in the Exchange Gain/Loss account equaled the sum total of all gain/losses related to completed USD sales transactions. In my case, there was a debit balance of $327.32 at this point. When I then run USD to CAD currency revaluation it creates a journal entry that shows a debit the Exchange Gain/Loss account for $1101.66 and a credit to my USD bank account for the same amount. It is not clear to me what the amount $1101.66 represents and how it is calculated. I would very much appreciate some help on this.

Notes:

• I have 1 USD bank account where I receive payments from US customers and 1 CAD bank account where I receive payment from Canadian customers.
• Approximately once a month, I transfer almost all funds from the USD account to the CAD account.