Everything about Multi-Currency in Tally.ERP 9

Tally is one of the most popular accounting software. Knowledge of Tally is one of the basic requirements for almost all accounting jobs in India. Tally is used for the maintenance of business records and the preparation of financial statements. It is an accounting software used for the completion of various accounting tasks speedily and with perfection. It offers comprehensive business functionalities such as accounting, finance, inventory, sales, purchase, point of sales, manufacturing, costing, job costing, payroll, and branch management along with compliance capabilities for TDS, TCS and GST as well. It is primarily designed to compile, and store accounting records electronically. However, its various services have expanded further. These range from entering day to day transactions, maintenance of inventory records, generating various reports, preparing budgets, financial management tools like cash flow, fund flow, auto calculation, and embedded audit tools as well. 

Did you know? Tally.ERP9 provides an educational mode in which you can learn Tally without a licence fee but you can't change the date in that mode; it is set by default as 1 April.  

Defining multi-currency in Tally.ERP 9

Tally.ERP 9 provides many valuable facilities related to accounting and its management. Multi-currency in Tally is a very easy and effective application in maintaining accounts. This type of application is time-effective for accounting professionals who are able to execute their respective functions in a seamless manner. This has spurred an increase in the usage of Tally in today's business environment. Globalisation has paved the path for innumerable business and trade operations between all the countries of the world. Such transactions are made in distinct currencies. This makes it imperative to have them recorded either in their own home currency or in the foreign currency. The base currency is the currency in which you maintain your books of accounts. Tally supports the recording of all transactions in multi-currencies, with accurate details about the rate of exchange, and also enables an automatic calculation of gain or loss that takes place. It thus eases the entire process of the various financial operations during business deals and transactions.

Also read: All About Creating A Company In Tally.ERP 9

 Advantages of multi-currency:

•  You can create as many foreign currencies as required.
•  You can pass transactions in multi-currencies.
•  Tally automatically calculates the forex gain /loss
•  You can see reports like balance sheet and profit and loss account etc. in multi-currency. 

Did you know? The balance sheet as well as the profit and loss account of a company is always maintained in the base currency.

Activating multi-currency in Tally.ERP 9

 Given below are the details of activating multi-currency in Tally.ERP 9:

Step 1: Creating Currencies

• The first step in this is of Creating Currencies.
• Go to Gateway of Tally – Accounts Info – Currencies and then click on Create.  
• You now enter the details as indicated:
• Enter the symbol of the said currency with at least two decimal places
• Amount that indicates Millions: You set it to- 10,00000.00. This will reflect as 1 million.
• Symbol of currency suffixed to amount: Say yes. The amount will be showcased in the respective currency symbols like that of pounds, dollars, yen etc.
• Add a space between the symbol and the said amount – when you set this to ‘yes’, Tally will automatically create a space between amount and symbol e.g. $ 50000

Step 2. Defining rate of exchange:

• You can alter the currency to define the rates of currency exchange on different dates. This is done in the following manner:
• Go to Gateway of Tally – Accounts info – Currencies – Alter
• You now enter the details as indicated:
• You can state a different exchange rate for different dates. However, you need to be familiar with a few terms of currencies that are used in Tally ERP.9 to get a better idea of the rate of exchange.
• How to understand the terms of currencies:
• Standard rate – Is the current prevailing rate of currency in the market
• Rate on the date of sale – Is the rate of the currency in which you sell it to your Banker
• Rate on date of purchase – Is the buying rate which you buy it at from the Bank

Also read: All About Tally.ERP 9's Cost Centre

Step 3. Understanding Forex gain or loss:

Let's understand what is Forex gain or forex loss with the help of the following example:

Example: On 1 June 2021,  KBC house sold goods of $500 to a foreign company ABC Store. The exchange rate of 1 June 2021 was ₹ 70 for 1 USD. On 20 June 2021, KBC House received $500 in their bank account and the exchange rate was ₹75 for 1 USD on that day.

The calculations will be performed in this way:

In the same way if the exchange rate decreases the Seller will experience Forex loss. 

Step 4. How rates of exchange are defined

Step 5. How to alter currencies:

You can modify or delete a currency master in the alteration mode and also change the rate of exchange in the following manner:

Step 6. Creating a party ledger with foreign currency

For maintaining multi-currencies you will have to create a party ledger with the said foreign currency. This is done as follows:

Also read: All About Banking Entry In Tally ERP 9

Step 7. Creating a Sales ledger and a Bank Account Ledger:

You can create a sales ledger and a bank ledger in the following manner:

Step 8. How to pass a transaction:

Consider a sales transaction in the dollar currency as follows:

MAC Ltd sold 100 numbers of a product valued at $ 100 on December 2, 2020 to XYZ Ltd. The exchange rate being $ 90 on that specific day.

Process of entering this transaction:

Now on receipt of the sum from ABC INC, we have to pass a receipt voucher. To pass receipt voucher,

Forex gain/ loss arises due to the difference between foreign currency standard rate and currency’s selling rate or buying rate on a particular day. The unadjusted Forex gain or loss is indicated via the following steps:

Making an adjustment to the unadjusted Forex Gain/Loss:

At the onset, you have to create a ledger titled FOREX GAIN & LOSS under the section of Indirect Expenses

Process:

Gateway of Tally >> Accounting Info >> Voucher Type >> Alter >> Journal >> Name of class. specify a name say 'Forex'.

• In the sub-screen, use Forex Gain/Loss adjustments = yes >> select the Forex gain & loss ledger and accept.
• In order to adjust the unadjusted forex gain/loss in the balance sheet, pass a journal entry.
• XYZ Ltd, Cr Forex Gain & Loss
• Now select - Bill References.
• Accept the voucher to remove unadjusted forex gain loss

Also read: How to use Tally ERP 9. Release 6 for GST

Conclusion:

Multi-currency in Tally.ERP 9 provides a complete support that enables the recording of transactions in various currencies, specifies the rate of exchange, also enables an automatic calculation of Forex Gain/Loss while making simplified adjustments as well. Tally ERP.9 has proved to be an indispensable software to the numerous professionals in the world of accounting. It operates seamlessly, helps you save time, and executes operation to accuracy. Almost every business enterprise resorts to this software for its innumerable benefits. Tally users can also use the Biz Analyst App to manage the business more effectively. You can manage the accounts, make ledgers, and even do data entry to keep the business on the right track.