It should not be assumed that when foreign exchange is purchased and sold it is always secured and disposed of for cash. It is the custom in the larger seaboard cities to pay for exchange on the steamer sailing date for checks, and on the date payable abroad for cable transfers. That means that several days may elapse between the time of delivery of exchange and its payment, so that the entry might actually be at the time of purchase as follows:

Debit: Due from Foreign Banks and Bankers

Credit: Due for Foreign Exchange Bought

On the date the exchange is paid for, there is a reversing entry, namely:

Debit: Due for Foreign Exchange Bought Credit: Cash

So with exchange sold, on the date of delivery the entries are as follows:

Debit: Due for Foreign Exchange Sold

Credit: Due from Foreign Banks and Bankers

On the date that the funds are received for the exchange the entries are:

Debit: Cash

Credit: Due for Foreign Exchange Sold

The brokerage commission that may be earned when exchange is bought or sold through a broker cannot be dealt with here. It suffices to say that banks usually keep a liability account showing the amount due brokers for commissions. This liability is wiped out monthly upon payment of brokers' bills covering the commissions.