There occur exchange differences because on the one hand you post invoices received and issued and on the other reconcile bank statements, such lines therefore cannot be closed automatically. In addition to closing a local and foreign currency post you have to post exchange differences.

Foreign currency and their equivalent local currency invoices are posted to subject accounts and to the general ledger, according to the central rate of the national bank. On the other hand payments are usually made according to the exchange rate of business banks. For detailed treatment see Monitoring Currency Rates.

Example:

Let us say that on June 6th, 2007 you received an invoice from a foreign supplier (Tuji dobavitelj Ltd.) in the amount of €5,000. The then valid exchange rate was $1.30 for €1. The invoice was paid to the supplier on June 29th, 2007 in the amount of €5000. The business bank has charged the outflow according to the then valid exchange rate of $1.4 for €1.

Foreign currency transactions post is closed. Foreign currency outstanding items report shows the balance of €0, but the post is outstanding for the amount of €274.72 in local currency. (To see examples of reports of outstanding items before and after posting exchange differences see foreign currency outstanding items.) 

The following is displayed in balance overview:

Having posted the invoice and corresponding payment, you can select the function of automatic posting of exchange differences that opens a window for entering criteria. The latter can be found in the lines of journal entries:

The following is displayed in balance overview after posting successfully finishes:

Related topics:

• Posting exchange differences of open documents.

For a general description of functions see:

• Exchange Differences