Solve Example for Foreign Exchange Loss Journal Entry

 Hello Readers

                           Today's post is all about the foreign exchange loss journal entry in accounting.

Before we start to make a foreign loss journal entry let me tell you it definition "A foreign exchange loss journal entry records the financial impact of losing money due to unfavorable changes in exchange rates when dealing with foreign currencies."

Now let's start example:

Foreign Exchange Loss Journal Entry Example

Let's say your company had a Euro liability of €10,000, and the exchange rate moved unfavorably from 1 USD = 0.9 Euros to 1 USD = 0.85 Euros, resulting in a loss:

• Determine the loss:

Loss = (Original Liability - Current Liability) = (€10,000 - €8,500) = €1,500

• Record the journal entry:

Debit: Foreign Exchange Loss €1,500

Credit: Euro Payable €1,500

This entry recognizes the €1,500 foreign exchange loss on your company's income statement, reducing the Euro liability on the balance sheet to reflect the new, less favorable exchange rate.

Conclusion

Here in this post, we add an example for foreign exchange loss journal entry so if you are an accountant then you should read this post till the end.