Foreign Exchange Market Fundamentals
The foreign exchange market, or currency market, facilitates foreign currency and coin transactions between different countries.
Market Exchange: This is where currencies of different countries are bought and sold.
Key Concepts in Currency Exchange
Nominal Exchange Rate
The nominal exchange rate is the relative price of one currency in terms of another. It represents the number of foreign currency units required to obtain one unit of the national currency.
Depreciation of Exchange Rates
Depreciation of
Read MoreUnderstanding Key Accounting Concepts and Financial Statements
Key Accounting Concepts and Financial Statements
What are Circulating Assets?
Current Assets: These are items representing assets or securities resulting in the permanent conversion of the commercial or production cycle dedicated to the company. They represent availability, goods that may become available in the normal course of business with a maximum of one year from the balance sheet date. Examples include cash, bank accounts, accounts receivable, customer or debtor sales letters receivable, merchandise
Read MoreJournal Entries and Accounting Scenarios Explained
Accounting Transactions
Initial Balances:
Box: 8,000, Bank: 53,000, Merchandise: 16,000, Effects C BC: 3,400, Clients: 14,000, Furniture: 8,000, Machinery: 10,000, Element Tran: 90,000, HP receivable: 7,000, SS Creditors Agency: 3,000, Suppliers: 17,500, C purposes P: 12,900, Creditors: 8,000, Capital: 254,000
Transaction 1
Supplier to deliver 1,500 € (+ tax) on account of a purchase within 15 days.
Journal Entry:
Advance to Supplier: 500 (407), TAX SOPRTE: 750, Bank: 1575 (572)
Transaction 2
Purchase
Read MoreCurrency Depreciation, Interest Rates, and Exchange Rate Dynamics
Currency Depreciation and Current Account Effects
Question: “Sometimes currency depreciation does not improve the current account balance in a country.” Is this true or false? Explain your answer.
TRUE.
Normally, when a country’s currency depreciates, its exports tend to increase, and imports tend to decrease. This happens because the country’s goods and services become relatively cheaper for foreigners, enhancing its attractiveness and competitiveness.
An increase in exports leads to an increased
Read MoreIFRS and GAAP Accounting Principles: Questions and Answers
IFRS and GAAP Accounting Principles
T8
Which false? a) Receiv. include equity sec…
In record a factori trans.: d) IFRS all. partial
Under IFRS: a) the entry to record uncoll. GAAP.
Under IFRS, loans and receiv b) Amortiz c. adjust
T9
Which correct? b) IFRS per revalu (ex goodwill).
Res. and develop costs are: a) exp under GAAP.
IFRS allows. Which correct regarding? c) The journal entry to record a revaluation when the…
T10
The acc. bonds pay.: essent. same IFRS/GAAP
Which false? a) Under IFRS, c. liab.
Read MoreInternational Trade and Currency Markets
The Market Exchange Rates
Facilitating International Trade
Key elements for facilitating international trade:
- Relative prices for currency conversion
- A market for currency exchange
- A system for managing exchange rates
Transactions are conducted within the currency exchange market.
1. The Currency Market
Currencies are traded for various reasons:
- Profitability from buying and selling assets
- Speculation on exchange rate fluctuations
Supply and demand determine the equilibrium price, known as the exchange rate.
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