Exchange rates and accounting issues

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Every nation has its own currency and to obtain another currency it is necessary to buy it using the appropriate exchange rate. The price of a currency, as compared to another one is called the exchange rate. To exchange money means to convert the amounts of one currency into another. The exchange (exchange rate) varies constantly and indicates the rate of conversion.

For example, on January 1st

  • 1 Euro (EUR) was equal to 1,22637 US Dollar (USD)
  • 1 US Dollar was equal to 0,81529 Euro
  • 1 EUR was equal to 1,08222 Swiss Franc (CHF)
  • 1 EUR was equal to 126,52 Japanese Yen (JPY)

Basic Currency

Amounts referring to different currencies cannot be totaled directly. It is necessary to have a basic currency to refer to and to be used for the totals.
The central point of accounting is that the totals of the “Debit” balances must correspond to the totals of the “Credit” balances. To verify that the accounting is balanced, there must be a single currency with which to do the totals.
If there are different currencies, the basic currency must be indicated before anything else. Once the basic currency has been selected and some transactions have been executed, the basic currency can no longer be altered. To change the basic currency, the accounting must be closed and another one created with a different basic currency.
The basic currency is also used to establish the Balance Sheet and to calculate the profit or loss of the period.

Each amount has its equivalent in basic currency

To be able to add the totals and verify that the operations balance, it is necessary to have the equivalent in basic currency for every transaction. This way you can check that the total of the Debit entries is the same as the total of the Credit ones.
If the basic currency is EUR and there are transactions in USD, there needs to be an exchange value in Euros for every transaction in US Dollars. All the EUR amounts will be totaled to verify the accounting balances.

Account currency

Each account has its own currency symbol which indicates in which currency the account will be managed.
You must therefore indicate what the currency of the account will be. Each account will then have its own balance expressed in its own currency.
Only transactions in that currency will be permitted on this account. If the account is in EUR, then there can only be EUR entries on this account; if the account is in USD, then there can only be entries in USD currency on this account.
When you have to manage entries in YEN, then you have to have an account whose symbol is the YEN.

Account Balance in basic currency

For each account, alongside the balance in the account’s own currency, the balance in basic currency will also be kept, in order to calculate the balance sheet in basic currency.
The account card for the USD bank account has to correspond exactly to the bank statement as far as the USD amounts are concerned.
The value in basic currency will always be specified for each accounting entry. If the account is in USD, in the entries there will also be its value in EUR, beyond the amounts in USD. The EUR balance will be determined by the sum of all the entries expressed in EUR. The actual balance in basic currency will depend on the exchange rate factors used to calculate the exchange value of each single entry to EUR.
If on a given day you take the actual balance in USD and convert it to EUR at the prevailing daily exchange rate, you will get an exchange value that differs from the balance of the account in basic currency. This difference is due to the fact that the exchange rate used for entries on a daily basis is different from the actual daily exchange rate.
Thus there is a difference between the actual value at the daily exchange rate and the accounting balance in basic currency. This accounting difference is called the exchange rate difference.
The difference between the balance in basic currency and the calculated value has to be registered, when the accounting is closed, as an exchange rate profit or loss.  


Balances in another currency (currency2)

All the accounting reports will be calculated in basic currency. If you take the basic currency values and change them into another currency, you will get the balance in another currency. The program has a Currency2 column where all the values are automatically entered and presented in the currency specified as Currency2. The logic for the conversion of the amounts is the following:

  • If Currency2 is the same as the account or operation currency, then the original value will be used.
  • If the account is in USD and Currency2 is USD, the USD amount will be used.
  • In all other cases the basic currency amount will be used and changed into Currency2.
  • The daily exchange rate is used. Even for past entries, the exchange value in Currency2 will be expressed on the basis of the most recent exchange rate, and not on the historical one used on the day of the entry.

You need to pay attention to the fact that a balance converted to another currency will show small differences in the totals. Often the converted value of a total is not equal to the sum of split exchange values, as can be seen from the following example:


Basic currency EUR

Currency 2 USD








Total Assets




Personal capital



Total Liabilities



In the basic currency, total assets are equal to total liabilities. It is permitted to present a Balance Sheet that contains differences only if they are understandable and if it is indicated that they were due to calculations from another currency.

Accounts table, Currency 2 view

Account table, Currency2 view


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