Revaluation is performed only on Assets and Liabilities.
1. Revaluations are typically used to update foreign currency balances that will be cleared or settled at future date to the current exchange rates. An example of this is Accounts Payable. If you have an invoice that is over 60 days old, and the exchange rate has had a material change, you will want to revalue this balance to the current exchange rate.
2. Revaluations on Fixed Assets is useful to accurately describe true value of the goods after some period of time. This brings fair market value of your fixed assets in current period.
Example:
On 01-Dec-2009
-Functional Currency is USD
-Foreign Currency is ABC
-Conversion Rate is 2.
-Created invoice for 100 ABC, validated and accounted. Not Paid.
Accounting..
EnteredAmount(ABC) AccountedAmount(USD)
ItemExpenseA/C---------Dr----100---------------------200
LiabilityA/C--------------Cr----100---------------------200
As per the above journal lines on 01-Dec-2009, customer is liable to pay 200 USD to the supplier.
-End of the period, conversion rate has been changed to 2.5.
-So customer's liability will get increased to 250 USD(100*2.5).
-So customer suppose to pay 250 USD instead of 200 USD to the supplier.
-This is the true liability at the end of the period and this need to be reflected in customer's General Ledger. Loss 50 USD should be populated in Loss account.
-Revaluation adjusts these amounts and keeps gain/loss amounts in UnrealizedGain/Loss accounts defined in Revaluation window.
You can define and run revaluation as shown below
Navigation Path: General Ledger->Currency->Revaluation
It is two step process.
1. Define Revaluation(one time job)
2. Run CP 'Program - Revalue Balances'
