Revaluation of Foreign Currency Accounts: Understanding Exchange Rate Gain or Loss



If you issue an invoice in a currency different from your company’s base currency, the amount due may change based on the exchange rate at the time of payment compared to the rate on the invoice date

This variation is called an exchange gain or loss, and it arises when the exchange rate used at the time of invoicing differs from the rate in effect at the time of payment.

Traditional accounting systems often require manual journal entries to capture these differences and ensure accurate financial reports, but Wafeq handles this automatically. As soon as you record the payment, the system calculates the gain or loss and posts it to the Exchange Gain or Loss account.

In this guide, we walk through a practical example: We’ll issue an invoice in Egyptian Pounds (EGP), while the base currency of the company is Saudi Riyals (SAR).

We’ll then record the payment around 20 days later, at which point the exchange rate has changed, resulting in an exchange difference that Wafeq automatically recognizes in the journal entry.

Let’s follow the steps, from creating the invoice to posting the payment.

Issuing an invoice in a foreign currency

To issue the invoice, go to Sales from the main menu, select Sales Invoices, then click on the Create button.

• Select the relevant customer, and in the “Currency” field, choose "EGP - ج.م".
• Enter the invoice details, then click “Save.”

Once saved, the invoice amount will automatically be converted to Saudi Riyals (SAR) based on the exchange rate on the invoice date.



Recording a payment in the company’s base currency (SAR):

After approximately 20 days—during which the exchange rate has changed—go to Customer payments from the main menu, then click on Record payment.



• In the Customer field, Select the same customer the invoice was issued to.
• Under Paid through, Choose the account where the payment will be recorded.
• Enter the"amount received in SAR, along with the payment "date" and an optional "description", if applicable.



• Select the payment type as Invoices Payment.
• Then, click on the Add unpaid invoices button.



Select the invoice we previously created in EGP, then click on the Add button.



Make sure the paid amount fully covers the invoice, and the remaining balance is zero.

You can then download a PDF copy of the payment by clicking on the Download receipt PDF button, or save the transaction by clicking Save.



Viewing the exchange gain or loss

Go to Sales from the main menu, then click on Sales Invoices.

Make sure you're in Sheet view, and click on the invoice you’ve already recorded a payment for.



You'll find the Payments section. Click on the book icon to view the journal entry generated by the payment.