1) Yes.  The CAD equivalent is posted to the accounts where applicable.

3) We can't really answer this without knowing the journal entry.  Normally you transfer $100 from USD to CAD @ a rate of 1.3 you see US$100 come out of the USD account and CA$130 deposit to the CAD account.  When you run the General Ledger report for the USD bank account showing CAD you will see the $130.

When you wish, you can adjust the USD bank account through General Journal entries to reflect the proper CAD equivalent.  Some people do this at month end, some only at year end.  The program still doesn't have an easy obvious way to do this so most people post an entry to remove all USD and CAD dollars from the USD bank account so both are zero (using the Exchange Expense account), then post a second entry on the same date using the proper exchange rate to put the US and CA dollars back into the bank.

All the above applies to EUR and other foreign currency accounts as well.

Hi, thank you for your reply. In your example, I am wondering where that $30 gain goes? If I do the transfer funds entry using Sage transfer funds, it does not post the 30 gain anywhere, it just shows the correct currency in each account. If I post the transfer through the general journal I do the following: (FX is set to 1.00) then: Canadian bank 130Dr, USA bank 100CR, Gain/loss 30CR.

Is that correct? The gain of 30, increases my net income.

Also, if when the payment was initially received in usd, going into usd bank account, is setting the FX rate to that date correct? It is adjusting the Gain account but only by the difference of the exchange from fx sale % and fx receipt %. It didn't record a gain on the sale in the gain/loss account only when the payment is received. Is the flow of journal entries correct? I don't want to overstate the gain on foreign currency.

Thank you, I am getting confused!

Tea21 said:

I am wondering where that $30 gain goes?

I answered that under #3 in my answer.  The full $130 is seen in the USD bank account when you show the General Ledger report either in CAD only or in both currencies.  However, it is not a $30 gain because the $30 is just moved from the CAD equivalent in the USD bank to the CAD bank.  Yes, there may be a difference in the CAD equivalent that was deposited to the USD bank vs. what was transferred to the CAD account but that is why I mentioned the monthly or annual adjustment.

Tea21 said:

(FX is set to 1.00) then: Canadian bank 130Dr, USA bank 100CR, Gain/loss 30CR.

This likely works but it is not the way the program was designed and I've only seen this method a couple of times.  I've never passed it by an accountant.

Tea21 said:

Also, if when the payment was initially received in usd, going into usd bank account, is setting the FX rate to that date correct?

Yes.

Tea21 said:

It didn't record a gain on the sale

There is no "gain on the sale" until a payment is received.  If the exchange rate goes down from the time of invoice to the time of recording the payment, is it still a gain?

Tea21 said:

Is the flow of journal entries correct?

It sounds like it.

Thank you! Your help is much appreciated!

Hi Tea21, if this suggested answer helped, please do mark it as verified Thanks!