Revaluation is the process of revaluing balances that have transactions denominated in foreign currency.
Revaluation reflects the change in conversion rates between the date of the transaction and the current market rate of each currency at Period End so that your Payables and Receivables balances are reflected correctly. (used for Income and Expense accounts too)
Thus, Revaluation is just an adjustment entry so that your Account Balances in foreign currency are reflected at fair market value in your financial statements. Like Payables- AED invoice booked for 100 AED @ 15; thus payables balance as 1500 on 14th August.
But on 31st August, due to currency fluctuation, the AED Rate changes to 16.
It means on 31st August, your Payables AED is 1600 and not 1500.
After Revaluation, system will pass Revaluation Entry as:
Dr. Exchange Loss
Cr. Payables- AED.
Note that in September when you actually pay the Supplier, you might pay at the rate of 14 of 15.5. This is the reason the Revaluation Entry of 100 passed on 31st August needs to be reversed in September.
If you want to reevaluate your statements you can use this process one time per year, when you will issue your balance sheet.
You can use Revaluation process at the end of your financial year.
You have to reverse this journal because of these journals affecting the integration between GL and sub modules, so you must reverse it in the first period in the new year.
Please be informed that you must reverse the revaluation journal let's explain by an example.
1 - Suppose the Suppliers' balances are equal to 1000 USD in AP and the same in GL ( this the integration between GL & AP ).
2 - You submit the revaluation process at the end of your financial year and its journals as follow
15.00 USD Dr Payables Cr. Gain & loss account.
3 - The Payables balance in GL will be 85 USD ( 100 - 15 ) and the Payables balance in AP will be 100 ( there is a mis-integration)
4 - To restore the integration between GL & AP you must reverse the revaluation journals to let the AP Balance in GL to be 100 USD as the balance in AP