Understanding Realized Gain and Loss Processing
Realized gains and losses are the actual increases and decreases, due to exchange rate fluctuations, in the amount of money received in the base currency.
The system determines and generates realized gain or loss at payment time when you apply a payment on the payment worksheet or when the Payment Predictor process applies payments. The system also determines and generates realized gain or loss when you offset items using the Automatic Maintenance process or on the maintenance worksheets. If an item is not paid in full or offset in full, the system calculates realized gain or loss for a portion of the item at the time of partial payment or partial offset. All realized gain or loss figures appear in the period in which the item is paid.
If PeopleSoft Payables is installed on your system, PeopleSoft Receivables does not create realized gain or loss entries in the primary or secondary ledgers for a refund. PeopleSoft Payables generates any realized gain or loss entries for the refund. If PeopleSoft Payables is not installed on your system, PeopleSoft Receivables creates a real gain or loss entry in both the primary and secondary ledgers for a refund if required.
The Receivables Update process creates the realized gain or loss accounting entries and the Journal Generator Application Engine process (FS_JGEN) summarizes them.
Note: If you pay for items using drafts, the system calculates the realized gain or loss for the item when the cash is recognized at either the due date or the discount date when the draft status is Complete.
PeopleSoft Receivables calculates the realized gain or loss for discounts taken. The system performs the calculation for discounts taken automatically in Payment Predictor or manually on a payment worksheet. The system updates the Realized Gain/Loss account.
Example
Suppose that you pay an item whose entry currency was 100.00 EUR and whose base currency was USD 90.00. The exchange rate at the time of entry was .9 USD equals 1 EUR. When the payment is made, the exchange rate is .8 USD equals 1 EUR. A 2 percent discount was taken when the payment was made.
When the payment is made, the accounting entries would look like this:
|
Transaction |
Entry Currency Debit |
Entry Currency Credit |
Base Currency Debit |
Base Currency Credit |
|---|---|---|---|---|
|
Cash (debit) |
98.00 EUR |
|
78.40 USD |
|
|
Discount expense (debit) |
2.00 EUR |
|
1.60 USD |
|
|
Discount realized gain/loss (debit) |
|
|
.20 USD |
|
|
Receivables realized gain/loss (debit) |
|
|
9.80 USD |
|
|
Receivables account * (credit) |
|
100.00 EUR |
|
90.00 USD |
* For drafts, the receivables account is the last updated debit account in the draft life cycle (for example, remitted draft receivables or draft cash control). For all other payments, the receivables account is the AR account.