Module20:Multi-Currency in Tally
In this module, we'll explore how to manage and record transactions in multiple currencies within Tally, a common requirement for businesses dealing with international clients or suppliers. We will cover how to set up multi-currency, record transactions in different currencies, and analyze foreign exchange gains or losses. Practical methods, step-by-step exercises, and examples will help you implement and master these tasks.
1. Setting up Multi-Currency in Tally
To begin with multi-currency, you need to activate the feature in Tally and then configure multiple currencies.
Steps:
Activate Multi-Currency Feature:
Go to Gateway of Tally > F11: Features > F1: Accounting Features.
Under the section “Enable Multi-Currency,” select Yes.
Create Currencies:
Go to Gateway of Tally > Accounts Info > Currencies > Create.
Enter the details for the new currency:
Symbol: E.g., USD for US Dollars.
Formal Name: United States Dollar.
Number of Decimal Places: Typically 2.
Exchange Rate: Set the exchange rate relative to your base currency.
Set Exchange Rates:
Go to Gateway of Tally > Accounts Info > Currencies > Alter.
Select the currency you created and update the Exchange Rate as per the current market rate.
Exercise:
Activate multi-currency.
Create two currencies, EUR (Euro) and GBP (British Pound), and set exchange rates of 1 EUR = 1.1 USD and 1 GBP = 1.3 USD.
2. Recording Multi-Currency Transactions
With the currencies set up, you can now record transactions in different currencies. This is done by specifying the currency at the time of the transaction.
Steps:
Sales Invoice in Foreign Currency:
Go to Gateway of Tally > Accounting Vouchers > F8: Sales.
Enter the customer details and other required fields.
Under the Currency field, select the desired currency (e.g., EUR).
Enter the Amount and check the converted value in your base currency (USD) at the current exchange rate.
Purchase Invoice in Foreign Currency:
Go to Gateway of Tally > Accounting Vouchers > F9: Purchase.
Choose the currency (e.g., GBP) and proceed as you would with a regular purchase transaction.
Tally automatically converts the amount into your base currency.
Bank Transactions with Foreign Currency:
Go to Gateway of Tally > Accounting Vouchers > F5: Payment or F6: Receipt.
Select the currency for the transaction and enter the details. Tally adjusts for exchange rates in real-time.
Exercise:
Create a sales transaction with an invoice of €1,000 (EUR) to test the exchange rate and conversion.
Create a purchase transaction with a bill of £500 (GBP) and verify the conversion to the base currency.
3. Foreign Exchange Reporting and Analysis
Tally provides a way to view and analyze gains or losses due to fluctuations in foreign exchange rates.
Steps:
Analyze Forex Gains or Losses:
Go to Gateway of Tally > Display > Exchange Rate Variance.
Tally calculates and displays the forex gain or loss due to changes in exchange rates between the transaction date and the realization date.
Adjust Forex Gains or Losses:
Go to Gateway of Tally > Accounts Info > Currencies > Alter.
Adjust the exchange rates and review the updated forex gain or loss report.
Generate Forex Reports:
Go to Gateway of Tally > Display > Account Books > Currency Variance.
This report provides a detailed analysis of the foreign exchange variance across all transactions, showing gains or losses for each currency.
Exercise:
Update the exchange rate for EUR to 1.15 USD and GBP to 1.4 USD, then check the impact on previous transactions.
Generate a Forex report for both EUR and GBP to analyze any gains or losses.
Summary
By the end of this module, you should be able to:
Configure and manage multiple currencies within Tally.
Record transactions using various foreign currencies and understand how Tally handles conversion.
Analyze foreign exchange gains or losses and adjust for fluctuations in exchange rates.
Practical Example
Let’s go through an example where you invoice a client for €2,000. The exchange rate at the time of invoicing is 1 EUR = 1.2 USD. After two weeks, you receive the payment, and the exchange rate changes to 1 EUR = 1.25 USD. You would follow these steps:
Create the Sales Invoice with €2,000. Tally calculates this as $2,400.
Update the exchange rate to 1.25 before recording the payment.
View the Exchange Rate Variance report to observe a gain due to the exchange rate fluctuation.
Mastering these steps will give you robust control over multi-currency transactions in Tally, allowing for accurate financial reporting and management in a global business environment.
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