Overview

Exchange rate revaluation ensures your GL balances reflect current currency rates—especially during book closure or financial reporting. iVendNext lets you adjust these balances manually or automatically. This article explains how to manage revaluation when your Chart of Accounts includes multiple currencies.

1. What is Exchange Rate Revaluation?

1.1 Definition

Exchange rate revaluation is the process of adjusting the balances in GL accounts to reflect changes in currency exchange rates. This is particularly important for accounts held in foreign currencies, as fluctuations in exchange rates can impact the value of these accounts.

1.2 Why is it Important?

• Accuracy: Ensures that your financial statements reflect the true value of foreign currency balances.

• Compliance: Helps maintain compliance with accounting standards that require revaluation of foreign currency balances.

• Financial Reporting: Provides accurate data for financial reporting and decision-making.

2. How to Perform Exchange Rate Revaluation

2.1 Manual Exchange Rate Revaluation

iVendNext allows you to manually revaluate exchange rates for GL accounts:

1. Navigate to Home > Accounting > Multi Currency > Exchange Rate Revaluation.

2. Select the Company for which you want to perform the revaluation.

3. Click on Get Entries to fetch accounts with foreign currency balances.

4. The system will automatically calculate the revaluation amount based on the current exchange rate.

5. Click on Create Journal Entry to generate the revaluation entry.

6. Submit the journal entry to update the GL accounts.

2.2 Automating Exchange Rate Revaluation

To save time and reduce manual effort, you can automate the exchange rate revaluation process:

1. Go to Setup > Company > [Select Company].

2. Under Exchange Rate Revaluation Settings, enable Auto Creation of Exchange Rate Revaluation.

3. Set the frequency for automatic revaluation (e.g., monthly, quarterly).

4. Save the settings.

Once enabled, iVendNext will automatically create revaluation entries based on the specified frequency.

3. Handling Accounts with Zero Balances

From iVendNext v14, the system can handle foreign currency accounts with zero balances in either the base currency or the account currency:

• A separate Journal of type 'Exchange Gain/Loss' will be created in draft status for these accounts.

• You can review and submit these journals manually.

4. Best Practices for Exchange Rate Revaluation

Here’s a quick look at some of the best practices for Exchange Rate Evaluation.

• Regular Revaluation: Perform exchange rate revaluation regularly, especially before closing your books or preparing financial statements.

• Monitor Exchange Rates: Keep an eye on currency fluctuations to anticipate significant changes in account balances.

• Automate Where Possible: Use iVendNext’s automation features to streamline the revaluation process and reduce manual effort.

• Review Draft Journals: For accounts with zero balances, review the draft journals created by the system before submitting them.

5. Example Scenario

5.1 Revaluing a Foreign Currency Account

• Account Balance: You have a bank account in USD with a balance of $10,000.

• Exchange Rate Change: The exchange rate changes from 1 USD = 80 INR to 1 USD = 82 INR.

• Revaluation: The system calculates the revaluation amount as $10,000 x (82 - 80) = 20,000 INR.

• Journal Entry: A journal entry is created to adjust the GL account by 20,000 INR.

5.2 Automating Revaluation

• Frequency: You set the revaluation frequency to monthly.

• Automatic Process: At the end of each month, iVendNext automatically fetches the latest exchange rates and creates revaluation entries for all foreign currency accounts.