Transactions’ base currency valuations may change over time due to variations in the exchange rate between the base currency of an entity or subsidiary and the foreign currencies involved, which could have an effect on general ledger accounts. The base currency value of transactions recorded in a company’s general ledger accounts fluctuates in accordance with changes in the value of a foreign currency relative to the base currency of the company.
The following accounts are added to the chart of accounts after qualifying transactions when the Multiple Currencies feature is enabled:
- Realized Gain/Loss: Realized gains and losses result from payment applications like customer payment. It will calculate the difference in exchange rate between the source transaction and payment record.
NetSuite automatically calculates and posts exchange rate gain or loss when we apply a payment or credit memo to an invoice. Gain or loss amounts are posted if the exchange rate has changed between the initial transaction (invoice) and the current transaction (payment or credit memo). The gain or loss resulting from changes to the exchange rate posts by default to the Realized Gain/Loss account.
2. Unrealized Gain/Loss: Unrealized gains and losses result from month-end open balance revaluation. This will revalue the opening balances of revaluation accounts.
3. Unrealized Matching Gain/Loss: Matching unrealized gains and losses from funds deposited.
This type of gain or loss is shown on the GL Impact subtab of certain foreign currency transactions, such as the bank deposit for a customer payment. NetSuite creates a gain or loss as part of the bank deposit, regardless of the dates of the customer payment and bank deposit.
Base currency adjustments type currency revaluation records are created for those accounts that have foreign currency balance is zero and base currency still has balance. The currency revaluation records will reverse the base currency balance.
4. Rounding Gain/Loss: Gains and losses resulting from rounding differences.
This type of gain or loss is initiated when a payment transaction is applied to a source document transaction and a difference occurs due to the rounding of amounts.
These accounts track the values for exchange rate fluctuations separately from the values of initial transactions. The Realized Exchange Rate Gains and Losses and Unrealized Exchange Rate Gains and Loss reports will show the detailed view of these transactions.
Revaluation for transactions that remain open and balances in foreign currency accounts is a separate process. The process is usually run at the end of the period as part of the period close checklist and requires Currency Revaluation permission.
We can define rules to specify which accounts the different types of foreign currency variances post to. If there is no variance posting rules, NetSuite posts the gains and losses from fluctuations in foreign exchange rates to the default system-generated accounts described earlier.