Set up currencies
You must set up a code for each currency you use if you:
- Buy or sell in other currencies besides your local currency ($).
- Record general ledger transactions in both $ and an additional reporting currency.
After setting up the codes, assign the appropriate code to each foreign currency bank account, and assign a default currency code to foreign customer and vendor accounts.
You specify the currency codes in the Currencies list, including extra information and settings that are necessary for each currency code.
Tip
Create the currencies with the international ISO code as the code to simplify working with the currency in the future.
Use an external service to get the latest currency exchange rates into the Currencies list. For more information, see To set up a currency exchange rate service.
Important
Do not create the local currency code both in the General Ledger Setup and in the Currencies page. This will create confusion between the blank currency and the LCY code in the currency table, and bank accounts, customers or vendors might accidentally be created, some with the blank currency and some with the LCY code.
Currencies
The following table describes the fields in the Currencies list.
| Field | Description |
|---|---|
| Code | The identifier for the currency. |
| Description | A free text description of the currency. |
| ISO Code | The international three letter code to the currency defined in ISO 4217. |
| ISO Numeric code | The international numeric reference to the currency defined in ISO 4217. |
| Exchange Rate Date | The latest actual exchange rate date. |
| EMU Currency | Specifies if the currency is an EMU (Economic and Monetary Union) currency, such as EUR. |
| Realized Gains Account | The account where the actual gain is posted when you receive payments for receivables or register the actual currency rate on payments to payables. For an example of a receivable currency transaction, see the example below this table. |
| Realized Losses Account | The account where the actual loss is posted when you receive payments for receivables or register the actual currency rate on payments to payables. For an example of a receivable currency transaction, see the example below this table. |
| Unrealized Gains Account | The account where the theoretical gain is posted when you perform a currency adjustment. |
| Unrealized Losses Account | The account where the theoretical loss is posted when you perform a currency adjustment. |
| Amount Rounding Precision | Some currencies have other formats for invoice amounts than are defined in the General Ledger Setup page. If you change the amount rounding precision for a currency, all invoice amounts in that currency are rounded with the updated precision. |
| Amount Decimal Places | Some currencies have other formats for invoice amounts than are defined in the General Ledger Setup page. If you change the amount decimal places for a currency, all invoice amounts in the currency are rounded with the updated decimals |
| Invoice Rounding Type | Specifies the method to use if the amounts must be rounded. The options are Nearest, Up, and Down. |
| Unit-Amount Rounding Precision | Some currencies have other formats for unit amounts than are defined in the General Ledger Setup page. if you change the unit amount rounding precision for a currency, all unit amounts in the currency are rounded with the updated precision. |
| Unit-Amount Decimal Places | Some currencies have other formats for unit amounts than are defined in the General Ledger Setup page. If you change the unit amount decimal places for a currency, all unit amounts in the currency are rounded with the updated decimals. |
| Application Rounding Precision | Specifies the size of the interval that is allowed as a rounding difference when you apply entries in different currencies to one another. |
| Conversion LCY Rounding. Debit Account | Specifies conversion information that must also contain a debit account if you want to insert correction lines for rounding differences in the general journals using the Insert Conv. LCY Rndg. Lines action. |
| Conversion LCY Rounding Credit Account | Specifies conversion information that must also contain a credit account if you wish to insert correction lines for rounding differences in the general journals using the Insert Conv. LCY Rndg. Lines action. |
| Last Date Adjusted | The date of the last currency adjustment. |
| Last Date Modified | The date of the change to the setup of the currency. |
| Payment Tolerance % | The maximum payment tolerance % set for this currency. For more information, see Payment Tolerance and Payment Discount Tolerance. |
| Max. Payment Tolerance Amount | The maximum payment tolerance amount set for this currency. For more information, see Payment Tolerance and Payment Discount Tolerance. |
| Currency Factor | Specifies the relationship between the currency and the local currency using the actual currency rate. |
| Realized G/L Gains Account | Specifies the G/L account that is used to post exchange rate gains for currency adjustments between the local currency (LCY) and the additional reporting currency. The exchange rate gains are calculated when the Adjust Exchange Rates batch job is run to adjust general ledger accounts. This field might not be visible by default. It can be retrieved by personalizing the page. |
| Realized G/L Losses Account | Specifies the G/L account that is used to post exchange rate losses for currency adjustments between the local currency (LCY) and the additional reporting currency. The exchange rate gains are calculated when the Adjust Exchange Rates batch job is run to adjust general ledger accounts. This field might not be visible by default. It can be retrieved by personalizing the page. |
| Residual Gains Account | Specifies the G/L account that is used to post residual gain amounts (rounding differences) when an additional reporting currency is used in the general ledger application area. This field might not be visible by default. It can be retrieved by personalizing the page. |
| Residual Losses Account | Specifies the G/L account that is used to post residual loss amounts (rounding differences) when an additional reporting currency is used in the general ledger application area. This field might not be visible by default. It can be retrieved by personalizing the page. |
| Max. Tax Difference Allowed | The maximum amount allowed for GST/HST differences in this currency. For more information, see Correcting VAT amounts manually on sales and purchase documents. This field might not be visible by default. It can be retrieved by personalizing the page. |
| VAT Rounding Type | Specifies the rounding method for correcting GST/HST amounts manually in sales and purchase documents. This field might not be visible by default. It can be retrieved by personalizing the page. |
Available currency functions
The following table outlines key actions on the Currencies page.
| Menu | Action | Description |
|---|---|---|
| Process | Suggest Accounts | Use accounts from the other currencies. The most frequently used accounts are inserted. |
| Change Payment Tolerance | Change either or both the maximum payment tolerance and the payment tolerance percentage, and filter by currency. For more information, see Payment Tolerance and Payment Discount Tolerance | |
| Exchange Rates | View updated exchange rates for the currencies that you use. | |
| Adjust Exchange Rates | Update balances for general ledger, customer, vendor, and bank account entries. The update is useful if the exchange rate changed after the entries were posted. | |
| Exchange Rate Adjustment Register | View the results of running the Adjust Exchange Rates batch job. One line is created for each currency or each combination of currency and posting group that is included in the adjustment. | |
| Exchange Rate Service | Exchange Rate Services | View or edit the setup of the services that are set up to fetch updated currency exchange rates when you choose the Update Exchange Rates action. |
| Update Exchange Rates | Get the latest currency exchange rates from a service provider. | |
| Reports | Foreign Currency Balance | View the balances for all customers and vendors in both foreign currencies and in local currency (LCY). The report displays two LCY balances. One is the foreign currency balance converted to LCY by using the exchange rate at the time of the transaction. The other is the foreign currency balance converted to LCY by using the exchange rate of the work date. |
LCY and other currencies
If your company operates in more than one country or region, it's probably important that you can do business in more than one currency. You define your local currency (LCY) on the General Ledger Setup page. Afterward, your local currency will be represented as a blank currency on documents and transactions. When the Currency field is blank, the currency is LCY.
The following video explains how to set up your local currency.
Next, you must set up currency codes for each currency that you use if you buy or sell in currencies other than your local currency (LCY). Also bank accounts can be created using currencies. It is possible to record G/L transactions in different currencies, however, the G/L transaction will always be posted in the local currency (LCY).
Important
Do not create the local currency code both in the General Ledger Setup and in the Currencies page. This will create confusion between the blank currency and the LCY code in the currency table, and bank accounts, customers or vendors might accidentally be created, some with the blank currency and some with the LCY code.
Your general ledger is set up to use your local currency (LCY), but you can set it up to also use another currency with a currency exchange rate assigned. By designating a second currency as an additional reporting currency, Business Central automatically records amounts in both LCY and the additional reporting currency on G/L entry and other entries, such as VAT entries. For more information, see Set Up an Additional Reporting Currency. The additional reporting currency is most often used to facilitate financial reporting to owners that reside in countries/regions using different currencies than the local currency (LCY).
Important
If you want to use an additional reporting currency for financial reporting, make sure that you understand the limitations. For more information, see Set Up an Additional Reporting Currency.
Note
When you post to the general ledger using a foreign currency, Business Central converts the transaction to LCY using the currency exchange rate for the posting date. The G/L entry won't contain information about which currency was used, only its value in LCY. To keep track of the original currency, use the sales and purchase documents and bank accounts that store currency information for entries.
Rounding currencies
To manage currencies that don't use decimals and to avoid unnecessary decimals in foreign currency, you can use two different rounding features:
Unit-amount rounding
Amount rounding
These features can operate independently or in combination. In addition, the features can operate with invoice rounding.
As opposed to the invoice rounding features, the amount rounding and unit-amount rounding features affect only amounts in foreign currency-not the corresponding amounts in $. These two features don't post anything to general ledger accounts. So, no general ledger account needs to be specified on posting groups or elsewhere.
Unit-amount rounding
The unit-amount rounding feature controls how sales prices for items and resources in foreign currencies are rounded on sales and purchase lines. You must specify the rules for each currency separately, in the Unit-Amount Rounding Precision field in the Currencies list.
The unit-amount rounding feature is used automatically every time you enter an item or resource number on a sales line. If the invoice is for a customer with a currency code, the item or resource price is converted into the customer's currency. The price is rounded according to the unit-amount rounding precision for the currency.
Amount rounding
The amount rounding feature controls how amounts in foreign currencies are rounded on general journal lines, sales lines, and purchase lines. You must specify the rules for each currency separately, in the Amount Rounding Precision field in the Currencies list.
Amounts in foreign currencies are rounded when you fill in and post general journal lines, sales lines, and purchase lines.
Exchange rates
You can register exchange rates for each foreign currency and specify from which dates the exchange rates are valid. For example, you can enter daily exchange rates, monthly exchange rates, or quarterly exchange rates for each foreign currency.
You can retain historical exchange rates in the Currency Exchange Rates page for reference purposes. When you need to update exchange rates, you can use the Update Exchange Rates button to get the latest exchange rates from an external service provider.
General ledger accounts
You can't link currency codes to general ledger accounts because amounts on general ledger accounts are in $. If you have a bank loan in CAD and place deposits in a bank account in SEK, you can keep track of these accounts by setting up bank accounts in CAD and SEK. With posting groups, you can link the accounts to the relevant general ledger accounts. In the general ledger, the value of the amounts is shown in $.
You can enter a currency code on a general journal line and post the line to a general ledger account. The relevant exchange rate is used to convert the amount to $ before it posts to the general ledger account.
Example of a receivable currency transaction
When you receive an invoice from a company in a foreign currency, it is fairly easy to calculate the local currency (LCY) value of the invoice based on today's currency rate. However, the invoice often comes with payment terms so you can delay the payment to a later date, which implies a potentially different currency rate. This issue in combination with the fact that bank currency rates always differ from the official currency rates makes it impossible to anticipate the exact local currency (LCY) amount that is required to cover the invoice. If the due date of the invoice extends to the next month, you might also have to revaluate the local currency (LCY) amount at the end of the month. The currency adjustment is necessary because the new LCY value that is required to cover the invoice amount might be different, and the company debt to the vendor has potentially changed. The new LCY amount might be higher or lower than the previous amount and will therefore represent a gain or a loss. However, since the invoice has not been paid yet, the gain or loss is considered unrealized. Later, the invoice is paid, and the bank has returned with the actual currency rate for the payment. It is not until now the realized gain or loss is calculated. This unrealized gain or loss is then reversed, and the realized gain or loss is posted instead.
In the following example, an invoice is received on January 1 with the currency amount of 1000. At the time, the currency rate is 1.123.
| Date | Action | Currency Amount | Document Rate | LCY Amount on document | Adjustment Rate | Unrealized Gains Amount | Payment Rate | Realized Losses Amount |
|---|---|---|---|---|---|---|---|---|
| 1/1 | Invoice | 1000 | 1.123 | 1123 | ||||
| 1/31 | Adjustment | 1000 | 1125 | 1.125 | 2 | |||
| 2/15 | Adjustment Reversal on payment | 1000 | -2 | |||||
| 2/15 | Payment | 1000 | 1120 | 1.120 | -3 |
At the end of the month, a currency adjustment is performed where the adjustment currency rate has been set to 1.125, which triggers an unrealized gain of 2.
At the time of payment, the actual currency rate registered on the bank transaction shows a currency rate of 1.120.
Here there is an unrealized transaction, and therefore it will be reversed together with the payment.
Finally, the payment is registered and the actual loss is posted to the realized losses account.
See also
Update Currency Exchange Rates
Set Up an Additional Reporting Currency