Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
I am keeping track of my personal finances in a physical accounting journal. At a currency exchange desk, I converted 100 CAD into 75 USD. How should I record this transaction in my journal? In double-entry accounting, the debits and credits must balance, but my journal entry below does not balance.
| Account | Debit | Credit |
|---|---|---|
| Cash — USD | 75 | |
| Cash — CAD | 100 |
How should I journalize the currency conversion so that the debits and credits will balance?
It balances in terms of CAD.
The asset "USD 75" could be treated like a marketable security.
If desired, you could treat the the exchange fees as an expense rather than a decrease in the USD purchased.
I converted 100 CAD into 75 USD. How should I record this transaction in my journal?
The exchange rate was 0.75 USD = 1 CAD. And your primary currency is CAD so all accounting is done using CAD currency only. The journal entry is:
| Account | Dr./Cr. |
|---|---|
| Cash in USD | 100 Dr. |
| Cash in CAD | 100 Cr. |
| (75 USD bought for 100 CAD) |
The utilisation of USD currency or its closing balance will be reported using the exchange rate on the transaction date or balance sheet date, as the case is. The exchange loss/gain, if any, will be transferred to the forex translation expense or gain account.
Foreign currency should be treated as if they are quantifiable investments.How are you handling stock/bond/asset purchases in your journal? The Cash-USD is just an Asset with variable CAD valuation.