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Re: Playing Accountant

From: Boris Kortiak
Subject: Re: Playing Accountant
Date: Tue, 20 Mar 2001 10:17:37 -0500


>>> Gerd-Christian Michalke <address@hidden> 03/20/01 03:14AM >>>
On Mon, 19 Mar 2001, Derek A. Neighbors wrote:

But then, you have to save the exchange rate when the operation (let's say
a selling of goods) was done, and the exchange rate when the rate
difference was taken into the accounts.

Seems a little askew to me (not an accountant).  Wouldn't you want to know the 
conversion factors at the time the currency was converted or at the time of 

For example: on 2001/01/01 We sell from inventory 100 widgets at 10 elbur each. 
 On 2001/01/05 we buy 100 widgets at 5 elbur each.  On 2001/01/25 we send to 
our main office half our profit of 500 elbur.  The main office receives the 250 
elbur as 10 rollads, exchange rate of 25 elbur/rollad.  We keep 250 elbur in 
our cash account.  On 2001/01/31 we produce our month end reports using local 
currency for us.  We send the data to the main office which uses the current 
conversion rate of 20 elbur/rollad to come up with their month end reports.

In this scenario, it would seem to me that the only time the exchange rate is 
of import is when money moves across borders or for the purposes of 
consolidated reporting.  The inflation rate is always important in reporting to 
determine whether each part of the company is internally profitable, such as 
during the purchase and sale of goods.

Since the goods can always be stated as having been bought or sold in the local 
currency at the time of the transaction, I'm not sure I understand how the 
exchange rate affects these transactions.  On the other hand if the goods are 
imported, where one purchases the goods with foreign currency, then I can see 
the need for tracking the exchange rate in the case of that transaction.

So what do you mean by, " have to save the exchange rate when the 
operation (let's say a selling of goods) was done..."?

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