You are reviewing your client's Multicurrency company Balance Sheet, and the balance as of the previous fiscal year-end for their Canadian bank account, which they closed last year, is a $10 debit balance in US dollars (the home currency). However, the Canadian dollar balance correctly indicates the account has been closed. Why would this be the case? 1. You have to create a journal entry debiting foreign exchange gain or loss $10 and crediting the Canadian bank account $10.
2. The Canadian bank account has not been reconciled as of the last fiscal year.
3. The Balance Sheet shows the cumulative balance of the account in the home currency based on the home currency value of each of the transactions using the exchange rate that appears on each screen.
4. You have to perform a home currency adjustment for the Canadian bank account as of the current date
5. You have to perform a home currency adjustment for the Canadian bank account as of the last fiscal year.

1. You have to create a journal entry debiting foreign exchange gain or loss $10 and crediting the Canadian bank account $10.

4. You have to perform a home currency adjustment for the Canadian bank account as of the current date

Explanation:

This difference is the result of a foreign exchange loss. Foreign exchange gains/losses are normal for companies that operate in foreign countries. E.g. you prepared your financial statements by converting the foreign currency into your local currency, in this case you converted Canadian dollars to US dollars. But then the exchange rate between the currencies changes. If the value of the Canadian dollar's value increased after conversion, then you gained, and an adjustment must be made to show that gain. But if the Canadian dollar's value decreased after the conversion, then you lost (what happened here) and an adjusting entry must be made to report the loss.

In order to correct his, you must:

Dr Foreign exchange gain/loss 10

    Cr Canadian bank account 10

answer; comparing the additional benefits and costs;

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