Base Currency Adjustments
There is always a little amount of risk involved while transacting with customers dealing with foreign currencies. The risk is due to the fluctuation of exchange rates on a daily basis. Most of the times it is a profitable transaction, except for a few unlikely days of bad exchange rates.
In Zoho Books you can have an insight on the profit or loss incurred due to the change in exchange rates and also can apply the changes to open transactions.
Scenario,
- You raise an invoice for your customer handling Euro currency on 3rd November. The invoice is still in open state.
- On November 5th, the exchange rates change and you are worried about how it will affect your business.
- Adjust the base currency rate with foreign currency and have an insight about the profit/loss.
- You can change the rate for the open transactions with foreign currency.
How to Adjust Base Currency?
To adjust the base currency in Zoho Books, navigate to Accountant > Currency Adjustments and click + Make an Adjustment button.
The exchange rates used are just for the purpose of an example.
- Select the currency for which the adjustment needs to be made according to the changed exchange rate.
- Set the date on which you wish to have the adjustment made.
- Set the new exchange rate of the foreign currency to the base currency of your organization.
- Notes are mandatory. Fill in the reason on why a adjustment is made for your future reference.
P.S: We recommend you to have an accountant or a bookkeeper to have the adjustments made according to the date.
Note: Open transactions are very much mandatory to make base currency adjustments.
Once the details are filled, you will be navigated to confirm the adjustment.
| Fields | Description |
|---|---|
| Account | The account which is affected due to the change in exchange rates. |
| **Balance (FCY) | In this case the FCY is in Euro (EUR). The total amount present in FCY. |
| Balance (BCY) | In this case the BCY is in USD. The total amount in BCY with the previous exchange rate. |
| Revalued Balance (BCY) | The total amount in BCY after the new exchange rate is adjusted and revalued. |
| Gain or Loss (BCY) | This column shows whether you have made profit due to the change or incurred a loss. An amount with a negative sign will depict the loss incurred. |
*FCY: Foreign Currency ; BCY: Base Currency
If you wish to adjust the new exchange rate, check the box under the Select column and click on Make an Adjustment.
As soon as the adjustment is made, the particular account affected will be uploaded with the new values in the Reports section.
Business Overview
| Fields | Description |
|---|---|
| Profit and Loss | Non Operative Income/Expense (Exchange Gain or Loss) |
| Balance Sheet | Current Assets (Accounts Receivable) |
Accountant
| Fields | Description |
|---|---|
| Account Transactions | A entry with Base Currency Adjustment as type will be created. |
| Journal Report | A new section will be created with the date and title as Base Currency Adjustment. |
| Trial Balance | Assets (Accounts Receivable) |
Currency
| Fields | Description |
|---|---|
| Realized Gain or Loss | Transaction Type: Base Currency Adjustment |
You can always delete the base currency adjustment you made by selecting the entry from the Base Currency Adjustment window and click on the Delete option.
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