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1. Record the agreement of the sale by debiting 'Purchases' and crediting 'Accounts Payable.' For example, you purchase widgets that cost 20,000 euros on March 20. On March 20, 20,000 euros equals $25,000. Debit 'Purchases' by $25,000 and 'Accounts Payable' by $25,000.
2. Adjust accounts payable at year's end if the deal is still not closed. In the example, if 20,000 euros are worth $22,000 on Dec. 31, then debit 'Accounts Payable' by $3,000 and credit 'Foreign Currency Gain' by $3,000.
3. Finalize the sale and record the gain or loss on the transactions. In the example, the company pays for the widgets on Jan. 20 when 20,000 euros equaled $24,000. Debit 'Accounts Payable' by $22,000, debit 'Foreign Currency Loss' by $2,000 and credit 'Cash' by $24,000.