It is important to add a memo/note to the journal entry to indicate that the fee was $2,500 US dollars. And, yes, that amount depends on the day! Yesterday the US dollar might have been worth 1.22 and tomorrow it might be 1.24! That doesn’t matter: what counts is the prevailing rate on the day of the transaction, because that determines how many Canadian dollars came out of your account. In this instance, the $2,500 US dollars don’t appear in your accounting records: the only value that counts is the Canadian equivalent. Your artist fee expense becomes 2,500 x 1.23 = $3,075.00, and you’ll see that amount being withdrawn from your Canadian bank account. The day you purchase the US draft, the US dollar is trading at 1.23. Suppose you’ve engaged an American soloist and agreed to pay them $2,500. ![]() The bank calculates the cost in Canadian dollars by applying today’s exchange rate. bank drafts or wire transfers) as needed. That means you’re purchasing foreign currency (e.g. In the first instance, let’s assume you only have a Canadian dollar bank account. Many organizations make regular payments to foreign artists, suppliers and others – so how can they record the transactions correctly? ![]() ![]() Accounting logic says that your financial statements must be denominated in one currency.
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