Understanding Unrealized Gains and Losses in Hungary

Unrealized gains and losses are the differences in amounts that occur due to the fluctuation in the currency exchange rates that happen during the processing cycle of a voucher or an invoice. For example, if you create a voucher with an exchange rate of xx, and you pay the voucher three days later with the current exchange rate of yy, then the difference between the voucher amounts when the voucher was created and when it was paid is a gain or loss. However, those gains and losses are unrealized, or not reflected, in the general ledger and accounts payable records until you create accounting entries to account for such differences. Therefore, in Hungary, you run unrealized gains and losses programs to calculate unrealized gains and losses after you process invoices or vouchers.

The process to calculate and account unrealized gains and losses includes:

• Revaluating the domestic amounts of the corresponding foreign amounts at the end of year.

• For each foreign open invoice, revaluating the amounts based on the existing exchange rate at year-end.

• Updating your general ledger, accounts payable, and accounts receivable records.