Accounting in dinar and dollar: keeping books straight as exchange rates move

Why profits get distorted when rates move

If you buy goods in dollars and sell in dinars after the rate moved, you may appear to gain or lose because of FX rather than trading. Without separating the two, you make wrong pricing calls: raising a price on an item that’s actually profitable, or keeping a loss-maker.

The distortion also appears in receivables. An invoice in dollars is shown today as one dinar figure and tomorrow as another if the rate moved, even though the dollar principal did not change. If a report mixes the rate movement with the sale, a manager may think profit rose or fell when it is only a valuation effect.

The accounting aim is not to forecast the market rate. It is to keep each movement clear: how much we earned from the sale, and how much came from the exchange difference. Commercial decisions rest on the first; cash and currency management rest on the second.

The same pattern appears on the cost side in importing: goods arrive on a dollar invoice, freight or clearance is paid in dinars, then the goods are sold weeks later at a different rate. If purchase cost is not kept at that day’s rate, landed charges are not kept separate, and later settlement or revaluation differences are not shown on their own line, item cost is mixed with a paper gain or a paper loss.

Example: an invoice in dollars collected in dinars

The figures below are a labelled teaching example, not an official exchange rate and not the market rate on a particular day. They must not be copied as if they were certified numbers.

Example: a sales invoice is issued for $1,000, and the rate recorded on the invoice date is 1,320 dinars per dollar. The dinar entry that day is 1,320,000 dinars. Days later the customer pays in dinars, and the rate in force on the collection date — under the company’s policy in the example — is 1,350 dinars per dollar, so 1,350,000 dinars enter the cash box. The receivable is cleared at 1,320,000 dinars, and the 30,000-dinar difference is an FX effect in this example, not an increase in the selling price.

If the 30,000 dinars were added to the item margin, the sale would look more profitable than it was, and a later price might be set on a false figure. The sales margin should rest on the invoice-date rate, and the collection difference should appear as an exchange difference.

The core rules

These rules stop trading profit being mixed with the rate difference, whether collection is in dinars, in dollars, or in both on the same invoice. Period-end revaluation is not a cosmetic entry; it shows the effect of a rate move on what has not yet been collected, or on foreign-currency cash still on hand, without rewriting earlier invoices.

• Every document in its original currency at that day’s rate, with the rate stored by date for reference.
• Each customer and supplier account in its real trading currency.
• Separate cash boxes and bank accounts for dinar and dollar, with no mixed balances in one field.
• Revalue foreign-currency balances at each period end, and show the result in a clear line.
• A profit report separating sales margin from FX differences.

What the software must support

Before buying accounting software for a company that trades in both currencies, ask to see these functions on trial data, not on a slide. If one of them is missing, you will return to manual sheets whenever the rate moves.

A short test exposes the gap: enter an invoice in dollars, change the next day’s rate, collect part in dinars and part in dollars, then ask for the profit report and the FX-difference report. If only one amount appears, or the invoice-date rate was not stored, the software will not be enough at the first real movement.

• Entry of a daily rate approved by management, with a log of every change.
• An invoice in one currency and a receipt in another, with change calculated in the currency the customer chooses.
• Items priced in dollars and shown in dinars at the approved rate, with the option to fix some items in dinars.
• Revaluation of foreign-currency receivables and cash on a date you set, and a report that isolates the result.
• A permission that blocks changing a past day’s rate without an audit trail, so profit is not rewritten after the period is closed.

Daily pricing in shops

In retail, imported items are priced in dollars and shown in dinars at a rate the manager sets daily. The system recalculates displayed prices instantly, with the option to fix certain items in dinars so local goods are not repriced with every daily move.

Shelf pricing and the accounting entry are not the same thing. The price on the shelf may change today, while yesterday’s invoice stays posted at that day’s rate. Mixing the two confuses both the count and the sales figures.

Shops that take both currencies at the till face an extra test: if a customer tenders some dinars and some dollars against one invoice, each part must close in its own currency, change must be clear, and both cash boxes must move correctly. If the system forces everything into dinars before posting, you are back to a manual calculation at rush hour.

What a checkout tied to accounting and inventory needs is covered in accounting and POS systems. Published starting prices and timelines are on the pricing page: accounting and POS starts from $500 over 2 to 4 weeks for one branch and one till, and hardware is set out in the proposal.