MoneyWorks Manual
Exchange Rates
Exchange Rates do of course fluctuate. MoneyWorks stores one exchange rate per currency per period. The exchange rate (R) is stored as the number of foreign currency units the base currency is worth, i.e.
$X = R * $Local
When the exchange rate is changed (using the Change Currency Rate command), MoneyWorks will preserve the Currency Ratio. It does this by (in effect) recalculating what the balance in the delta account should be to preserve the ratio, and transferring the difference to a currency gain/loss account.
Thus if we revalue the exchange rate in the previous example from 1.5 to 1.4:
Our $X150 are now worth 150/1.4 = $107.14, so we need to change the amount in our delta account by 7.14 to maintain the Currency Ratio.
Thus we debit the delta account 7.14, and credit the currency gain account by 7.14. The balances in our $X bank accounts are now:
$X Bank Account $150.00
$X Bank Delta Account - 42.86
Which is sensible, because we still have $X150, even though the rate may have changed. The magic thing is that our exchange rate is preserved:
$X = R * $Local
R = $X/$Local
= 150/107.14
= 1.4