USA Exchange Rate-Unrealized or Realized Gain/Loss

Jun 13, 2024
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United States
Hi all, hoping someone can clarify this. I have two bank accounts in Canada. One bank account is in USD and the other bank account is in CAD. I transferred money from the USD account to the CAD account mid May (exchange rate was approximately 1.34). On 5/31/24, I still had a balance in the CAD account and did not transfer it back to the USD account (exchange rate was approximately 1.40 on 5/31/24). When I completed the May bank reconciliation, I was showing a loss in the CAD account due to the increase in the exchange rate. I know I need to credit Cash to clear my bank reconciliation. The question becomes if this is an unrealized or realized loss (the debit). Is this considered an unrealized loss since I did not move the money to the USD account (paper loss) or is it a realized loss? If unrealized, would this loss show on the balance sheet in "Other Comprehensive Income," which is a line item of Equity (credit Cash, debit Other Comprehensive Income)? If realized loss, I would credit Cash, debit Exchange Rate Loss on Income Statement. If in "Other Comprehensive Income," does this account work similar to an accrual account such that it needs cleared out and moved to the income statement when I do eventually move the money from the CAD account back to the USD account? Please help clarify.

Thank you,
Lori Klay

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