Transfer from base currency account to foreign currency account

There are a few currency conversions accounts used for multi-national operation. Realized gain/loss, unrealized gain/loss, and CTA are all important based on the requirement of the specific transaction. There is also the concept of functional and transactional currency within a single legal entity that does business in multiple currencies.

If you are moving between two accounts in the same legal entity then there should already be a functional currency (entity value currency) tied to both accounts. There would only be a realized gain/loss on the transfer based on the functional currency value and not the local account value. If, on the other hand you are moving between two legal entities with two different organization functional currencies the transfer would be different - and there might be no gain/loss on the transaction until a consolidation of multiple entities when you revalue the inter-company payable/receivable account.

Assuming you have two accounts in a US legal entity and you are moving between two accounts in the same legal entity you would:
1) Compare the functional currency value for the CAD to the USD value. This would look at the USD value at the time the CAD were acquired or last revalued. Say they are valued at the current conversion rate of .97 (1 CAD to .97 USD) - the current value of the CAD account would be $15,171.
2) Pulling the funds out of the CAD account would normally be done at both the CAD and USD values (conversion supported on the transaction) - with an entry to the USD account where the funds will land. The transaction to balance would be put to a realized gain/loss on currency since it is a final transaction.

If you are moving funds between legal entities with unique functional currencies, or consolidating entities, or revaluing a specific account for a single entity close the transactions would be slightly different.

Bob Scarborough
www.tensoft.com