In order to identify the foreign exchange component of a transaction, a company must establish the currency in which its books and records should be maintained. This is the ___________________________
A)domestic currency.
B)currency of the primary economic environment in which a company operates.
C)foreign currency.
D)translation currency.

Question

Quizplus · Accepted Answer

The currency in which a company's books and records should be maintained is the currency of the primary economic environment in which it operates. This allows the company to identify foreign exchange component of a transaction by comparing the currency it uses to its domestic currency. The domestic currency is the currency of the country in which the company is headquartered, not necessarily the currency in which it operates. Foreign currency is the currency used for transactions that take place outside of the primary economic environment. Translation currency refers to the currency used for financial reporting purposes when a company operates in multiple countries with different currencies.

In Order to Identify the Foreign Exchange Component of a Transaction