Multi-currency lets you transact in currencies other than your base, holding foreign balances and revaluing them as exchange rates move. It keeps the books true when you buy or sell abroad, separating the rate you struck a deal at from the rate today.
- How currencies and rates are defined
- How an account treats foreign balances
- What period-end revaluation does
- Realised versus unrealised gains and losses
How it behaves
Currencies and rates
You define the currencies you trade in and their exchange rates against your base currency. A document in a foreign currency captures the rate that applied, so its base-currency value is fixed at the moment of the transaction.
How an account treats currency
Each ledger decides its own behaviour through two settings: a rate mode (use the rate on the day, or a weighted average) and a revaluation mode (stay at historical cost, or mark to market at period end). This is why a foreign bank account revalues while a cost recorded at a historical rate does not.
Period-end revaluation
At the close, open foreign balances on a revaluing ledger are marked to current rates and the difference posts as an unrealised FX gain or loss, a paper movement until the balance actually settles. When you do settle, the real difference is a realised gain or loss. The whole capability is gated by the multi-currency feature.
Three revaluation modes, not two
A ledger's revaluation mode is one of three, not a simple on/off: Historical (the default) is never revalued at all, the correct behaviour for something like a fixed asset bought abroad, its book value is meant to stay put. Reversal revalues at every close and reverses the mark the next day, every time. Permanent also revalues at every close, but the mark only survives at the close of your fiscal year, at every ordinary period close in between it reverses the next day exactly like Reversal does. This is easy to misread as a bug the first time it is seen; it is the intended behaviour.
Edge cases and good practice
- Permanent still reverses outside fiscal year end. Only a Permanent ledger's revaluation at the actual fiscal-year-end close is kept; every ordinary period close reverses it the next day regardless of mode.
- Know which ledgers are multi-currency. Only flagged accounts hold foreign balances; others take base currency only.
Related
- How to: Set up currencies
- Reference: Accounting Periods (revaluation at close)
- Reference: Chart of Accounts