How to Calculate Currency Exchange


If your company is a registered Canadian company than all the financial statements (assets, liabilities, equity, income and expenses) need to reflect in Canadian funds.

I will give an example of a US dollar purchase and payment. it will give you an idea of how the transaction will flow through the general ledger.

Purchase example: I will purchase $3000. worth of fabric from a US fabric store and the exchange rate on the day of purchase is 1.129%.

First – you need to find out how much $3000. US is in Canadian funds. ($3000. x 1.129= $3387.)

The entry will be:

Debit                    Credit

Raw Material Purchase          $3387.

Accounts Payable                                              $3000.

Exchange Gain or Loss                                        $387.


Payment example: Since I already have a US bank account I will simply write a US chq for $3000. the exchange rate on the day I wrote the chq is 1.174% ($3000. x 1.174=$3522.)  The entry will be:

Debit                    Credit

Accounts Payable                  $3000.

US Bank Account                                              $3522.

Exchange Gain or Loss              $522.