I have all my sales & all purchases as well as all A/R & A/P transactions in USD and Bank accounts maintain for it is also in USD. At the end of the year, I have to translate these values in CAD. What will be the another side entry when total sales & purchases are translated into CAD taking average exchange rate of the year? Same way, what will be the another side entry when A/R, A/P and Bank balance are translated into CAD taking closing exchange rate of the year?
This entry reflects the increase or decrease in the value of the Accounts Receivable or Accounts Payable due to the change in the exchange rate. The debit to the Foreign Currency Translation Reserve account represents the gain or loss on the translation.
When translating USD accounts receivable, accounts payable and bank balances into CAD using the closing exchange rate of the year, the entry would be as follows:
Debit: Accounts Receivable (Asset account) or Accounts Payable (Liability account) Credit: Bank account (Asset account)
This entry reflects the change in the value of the Accounts Receivable, Accounts Payable, and Bank account balances due to the change in the exchange rate.
It's important to note that these are general entries and that the specifics of the accounting treatment may depend on the accounting standards and regulations that apply to your business. It's always recommended to consult with a professional tax advisor or accountant to ensure that your entries are compliant with the laws.
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