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Accounting for Foreign Currency

Types of Currencies 1.  Functional Currency - This is the main or primary currency in which the business uses to conduct its operations.  2. Transactional Currency - This is the currency that was used to make payment.  3. Reporting Currency -This is the currency the company uses to prepare its financial statements, it can also be called the accounting currency. What is a foreign currency transaction?   A transaction that uses a currency other than the functional currency of the company. Gains/Loss from Foreign Exchange - A foreign transaction can arise to foreign exchange gains or losses due to foreign exchange rate fluctuations from transaction date, settlement date, and balance sheet date.   A gain or loss can either be unrealized or realized.       Unrealized Gain or Loss - the fluctuation in exchange rate is recognized as of the balance sheet date or a reporting date when  a payable in foreign currency remains unpaid or receivable in foreign currency remains uncollected.       Re