When provision is made for a bad debt on a foreign currency account, each transaction involved is revalued using the original exchange rate. Any difference arising between the result of the revaluation and the base currency value of the transaction, is posted to the currency adjustments account with a corresponding double-entry in the debtors control account.
The value of the debt converted to base currency at the original exchange rate is used as the figure for posting to the bad debts provision accounts in the Nominal Ledger. This will be the amount by which the turnover is reduced in the base currency.
The above action is also taken where a bad debt is processed without a provision having been made.