• EH Lim

How to record a foreign currency loan received?


The Bank, Accounts Receivable, and Accounts Payable account can be set with a foreign currency.

Instead of creating the foreign currency loan account as a Current Liability or a Term Liability type of account, which only can be set with a base currency, create it as a bank account type. Change the "Bank Account is" field under the Bank Setting tab of the Bank account to "Term Loan". Although, the "Term Loan" is a Bank account type, it will be shown under the Term Liabilities section of the Balance Sheet report.

A loan of US$100,000.00 has transferred to the SGD bank account; from the bank statement, S$138,580.00 has received. Assuming the exchange rate for the period is 0.7200USD:1SGD. The journal of the Transfer Funds transaction is:

Debit Bank: 138,580.00

Debit Exchange Gain/Loss: 308.89

Credit Loan: 100,000.00

Credit Loan~Delta: 38,888.89

The loan of S$138,888.89, which is US$100,000 at the exchange of 0.7200USD:1SGD, shows in the Balance Sheet report. Since the actual Singapore dollar received into the SGD bank is S$138,580.00; an exchange loss of $308.89 is recorded (138,888.98 - 138,580.00).

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