You’re buying goods from international suppliers that send you their invoices in foreign currencies. That’s perfectly normal.
One thing to keep in mind at all times is that your accounting is always done in one currency and not various at the same time. You may trade in different currencies, but they should be translated into one for your accounting purposes. This “one currency” is called in accounting world “functional currency”. Continue reading
I would first like to stress this – in your accounting you can do entries in only one currency. Only one and this will be called your “functional currency”. You may however have various currencies in use when it comes to dealing with your suppliers, customers and why not your employees.
So how does one translate into another? In your accounting you can only use your functional currency and for your transactions you’re free to use whichever is businesswise the best and most efficient. Continue reading
So what if you receive goods earlier than the invoice for them and as it happens, you need to take them into use right away. They need a price, that’s for one, but what if the price is quoted in a currency that fluctuates as compared to your functional currency?
Say that your functional currency is A and you bought something for 120B. The B in this case would be the foreign currency that fluctuates. The exchange rate is let’s say 1A = 1.2B. Continue reading
As we’ve mentioned before, a company’s functional currency is the main currency a company uses in its daily operations.
Given situations that may arise in the economic environment, i.e. change in the official currency used in the country the entity operates, the company is also required to change its functional currency. Continue reading
In essence, a functional currency is your main currency that you use in your business or unit of a business. Normally it’s expected to be the principal currency used in the economic environment the entity operates (generates and expends cash).
Now as it happens, businesses often encounter foreign currencies in their business – either buying from foreign companies or accepting currencies from clients. No matter the case, there are general treatments required if you’ve got transactions in foreign currencies. Continue reading
First off this question may seem confusing since you’ve always shown those profits and losses as a part of one or the other or even something called “non operating income”. One way or the other, there’s also an option to split those results into two groups – one part of the operating results and the other as a part of financial expenses and income. Continue reading