Multi-Currency Exchange Rate

Multi-Currency Exchange Rate

You can set currency exchange rates by going to Admin -> System -> Currency Rates.

If you need to make a journal entry that involves multiple currencies, be sure to use GL trading accounts (see multi-currency setup). An example journal entry to convert euros to dollars looks like the following:

-1000 EUR Bank Account
+1000 EUR EUR-USD Trading Account
+1075.74 USD Cash (1.07574 EUR to USD)
-1075.74 USD EUR-USD Trading Account

When you run a profit & loss statement (Ledger -> Reports -> Profit & Loss Statement), the system will convert trading account balances in other currencies to the base currency on the date the report is generated.

In the example above if the EUR to USD exchange rate is 1.12 when the report runs, the EUR-USD Trading Account balance will be:

EUR-USD Trading Account Balance = (1,000 * 1.12) - $1,075.24 = $1,120 - $1,075.24 = $44.76

$44.76 is the amount lost (expense) from the currency trading activity in the EUR-USD Trading Account. Euros are more valuable now, so you are down $44.76 since you had converted euros to dollars previously.