Hi Friends,
What is the use of Unrealized Gain/loss exchange rate, Can you explain with example?
which one come 1st ??? between Realized and UnRealized.
Regards
Unrealised is prior to invoice but a stock transaction has happened that created an unrealised gain, the realised is at the point of invoice processing and the actual rate is known. Step through a process and check the impact on accounts as you process.
Realized/unrealized is an accounting term for transaction events, especially and specifically for transaction related to cash. It is not which one comes first, it totally depends on the event. Assuming current market foreign exchange rate is different from your invoice rate, If your company bought from the market, the difference a realized gain/loss; if your company is preparing a financial statement and they’d like to accrual the differences, that’s an unrealized gain/loss.
In all, check with your accounting department and accounting policy. You guys might have a garbage account that writes off everything.
It is not solely cash, you receive in a foreign currency transaction and based upon the processed price the current currency rate would create an unrealised loss/gain. So your base cost price is x in home currency and you pay y in foreign currency which when converted back will be different to x creating the difference. This is unrealised because you have not yet made the final transaction. When you come to pay it this is the final amount, the conversion back to home is made and based upon the base price you would get a realised loss or gain. The unrealised is the expected based upon the invoice, teh realised when the cash transaction is made. The same is true of the sales side.
As this is posted in a software specific forum it has been answered in this manner, not from a theoretical accountancy concept, although the advice to talk to your accounts department is a valid one, but I guess you are learning this to implement, not to use.