Month-end closing rate and transaction rate are the two exchange rate affecting the business account, which has to update regularly.
The month-end closing exchange rate is an exchange rate applied to the system during the month-end process to revalue the balances in the foreign currency-denominated bank, receivable and payable account. The transaction exchange rate, on the other hand, is the exchange rate used in daily transactions for the month.
Based on IRAS e-tax guide, the exchange rate for GST purpose, daily exchange rate or exchange rate on a particular day of the month such as the last day of the previous month is acceptable, but must be consistent.
Comparing the two, using the exchange rate from the last day of the previous month as a transaction exchange rate may be less taxing than using a daily exchange rate.
Let's assume that the month-end closing exchange rate for one Singapore dollars against US dollars is:
January is 0.7350 US dollars
February is 0.7380 US dollars
March is 0.7370 US dollars
The exchange rate set up, if you are using the exchange rate from the last day of the previous month, in your business accounts will be:
Closing rate as of 31 January is 1SGD:0.7350USD
Transaction rate from 1 February is 1SGD:0.7350USD
Closing rate as of 28 February is 1 SGD:0.7380USD
Transaction rate from 1 March is 1 SGD:0.7380USD
Closing rate as of 31 March is 1SGD:0.7370USD
Transaction rate from 1 April is 1SGD:0.7370USD
Highlight the currency and click the Rate button on the icon bar of the currency window (the Currency feature is under the Show menu) to enter the new exchange rate for the period in MoneyWorks.
MoneyWorks process the revaluation automatically once a new rate has updated. Revaluation process converts the balances in the foreign currency-denominated account to the reporting currency, and journal the differences to the exchange account.
The exchange rate should update after you have completed the bank reconciliation and before open a new period to prevent unnecessary adjustment later.