Example

Suppose that the company currency has an exchange rate 1.5 and the foreign currency has exchange rates of 12 on January 1, 12.5 on January 2, and 13 on January 3.

On January 1, a purchase order of 100 is created in the foreign currency, and on January 2, an exchange adjustment is created. ( Accounts payable> Periodic> Exchange adjustment).

Because the purchase order has not yet been paid, a transaction of 0.5 (12.5 - 12) in the company currency is posted to the ledger account that is selected in the Unrealized lossfield in the Exchange ratesform.

On January 3, the vendor is paid. A new exchange adjustment is created. The transaction of 0.5 in the company currency is reversed in the account in the Unrealized lossfield.

A transaction of 1.0 in the company currency (13-12) is posted to the account that is selected in the Realized lossfield in the Exchange ratesform because the loss has now been realized through the payment.