Multi-Currency & Forex Gain/Loss

1. Core Concept

  • Multi-Currency: An advanced feature in TallyPrime that allows businesses operating internationally to record transactions (purchases, sales, receipts, payments) in foreign currencies while maintaining accounting ledgers and reports in the Base Currency (e.g., ₹ INR).
  • Exchange Rate: The conversion rate between a foreign currency and your base currency on a specific date.
  • Forex Gain / Loss: Due to exchange rate fluctuations between the date of transaction (e.g., Sales Invoice) and the date of settlement (e.g., Receipt), a business incurs a foreign exchange gain or loss. TallyPrime tracks these differences under Unadjusted Forex Gain/Loss until adjusted via a Journal Voucher.

2. Setting Up Multi-Currency in TallyPrime

Step A: Creating Currency Masters

  1. Press Alt + G (Go To) → Create Master → Currency.
  2. Fill in the Currency Details:
    • Symbol: $ (or use ASCII codes: Alt+0128 for €, Alt+156 for £)
    • Formal Name: US Dollars
    • ISO Currency Code: USD
    • Number of Decimal Places: 2
    • Word representing amount after decimal: Cents
  3. Press Ctrl + A to save.

Step B: Defining Rates of Exchange

  1. Press Alt + G → Alter Master → Rates of Exchange.
  2. Specify the Exchange Rates for required dates:
Date Currency Specified Rate (Buying Rate) Specified Rate (Selling Rate)
1-Apr USD ($) ₹82.00 / $ ₹83.00 / $
1-May USD ($) ₹84.00 / $ ₹85.00 / $

3. Setting Up Forex Gain/Loss Journal Voucher Class

To automate and cleanly adjust exchange rate gains or losses:

  1. Gateway of Tally → Alter → Voucher Type → Journal.
  2. Scroll to Name of Class and type: Forex Gain Or Loss.
  3. Set Use Class for Forex Gain/Loss Adjustments? to Yes.
  4. Select the Forex Gain/Loss Ledger (Created under Indirect Income / Indirect Expenses).
  5. Press Ctrl + A to save.

4. Complete Practice Set (International Business Cycle)

Part 1: Record Foreign Currency Transactions

Date Voucher Type Party Ledger Foreign Currency Details Base Currency Equivalent Narration
1-Apr Sales (F8) Global Tech USA (Debtor) $10,000 @ ₹83.00/$ (Invoice: EXP-01) ₹8,30,000 Being goods exported to US client
01-Apr Purchase (F9) Apex Imports UK (Creditors) $5,000 @ ₹82.00/$ (Invoice: IMP-101) ₹4,10,000 Being raw materials imported
1-May Receipt (F6) Global Tech USA $10,000 @ ₹85.00/$ (Agst Ref: EXP-01) ₹8,50,000 Being payment received from client
01-May Payment (F5) Apex Imports UK $5,000 @ ₹84.00/$ (Agst Ref: IMP-101) ₹4,20,000 Being payment made to supplier

Part 2: Calculating Forex Gain / Loss

  • On Sales Settlement (Global Tech USA):
    • Invoice Value (1-Apr): $10,000 × ₹83 = ₹8,30,000
    • Receipt Value (1-May): $10,000 × ₹85 = ₹8,50,000
    • Result: ₹20,000 FOREX GAIN (Income)
  • On Purchase Settlement (Apex Imports UK):
    • Invoice Value (01-Apr): $5,000 × ₹82 = ₹4,10,000
    • Payment Value (01-May): $5,000 × ₹84 = ₹4,20,000
    • Result: ₹10,000 FOREX LOSS (Expense)

Part 3: Adjusting Forex Gain/Loss (F7 Journal Voucher)

  1. Go to Vouchers → Press F7 (Journal).
  2. Select Class: Forex Gain Or Loss.
  3. Select Party Ledger: Global Tech USA → Tally automatically pulls the unadjusted balance of ₹20,000 (Cr).
  4. Select Party Ledger: Apex Imports UK → Tally automatically pulls the unadjusted balance of ₹10,000 (Dr).
  5. Save with Ctrl + A to transfer net forex variance to Profit & Loss A/c.

5. Report Verification

  • Unadjusted Forex Gains / Losses:
    Gateway of Tally → Balance Sheet → Look for Unadjusted Forex Gain/Loss under Assets or Liabilities.
  • Multi-Currency Ledger & Reports:
    Open any Party Ledger (e.g., Global Tech USA) → Press F12 (Configure) → Set Show Multi-Currency details? to Yes to view transactions both in Foreign Currency ($) and Base Currency (₹).
  • Forex Transactions Analysis Report:
    Gateway of Tally → Display More Reports → Analysis & Verification → Voucher Verification → Forex Transactions.