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Forward contracts can involve the exchange of foreign currency and other goods, not just commodities. For example, if oil is trading at $50 a barrel, the company might sign a forward contract with its supplier to buy 10,000 barrels of oil at $55 each every month for the next year.
For example, a company expecting to receive 20ac20 million in 90 days, can enter into a forward contract to deliver the 20ac20 million and receive equivalent US dollars in 90 days at an exchange rate specified today. This rate is called forward exchange rate.
A forward contract allows you to buy or sell an asset on a specified future date. To account for one, start by crediting the Asset Obligation for the current value of the good on the liability side of the equation. Then, on the asset side, debit the Asset Receivable for the forward rate, or future value of the good.
An FX forward is a contractual agreement between the client and the bank, or a non-bank provider, to exchange a pair of currencies at a set rate on a future date.
A forward contract allows you to buy or sell an asset on a specified future date. To account for one, start by crediting the Asset Obligation for the current value of the good on the liability side of the equation. Then, on the asset side, debit the Asset Receivable for the forward rate, or future value of the good.