Hello Everyone, I would like to thanks all about for your valuable feedback on previous articles.
Today we are going to study about Foreign currency feature of Tally.ERP9. This article will help you to understand the details concept of Foreign Currency or Multi Currency Feature in Tally.ERP9.

What is Foreign Currency Management in Tally?
Foreign Currency or Multi Currency feature in Tally is an important feature of Tally to raise Export & Import Invoice other than base currency. In simple word if an Indian Base Organization supply goods or service to outside India or Import any goods or service from outside India then they need to raise invoice or book the purchase expense entry in Foreign currency which is other than INR.

 Example: Indian Company named as ABC India export goods to UK for $50000 and receipt the amount after 1 week.
It has been found that many of Tally user who are dealing in export and import business but not using this Important feature of Tally. I had one feedback survey from them why they are not using Tally Feature for multi-currency Invoice booking, I was answered with
  1. It is not easy to understand
  2. Our Tally User don’t know properly
  3. We are keeping record in excel for these separately
  4. It shows wrong figure of foreign gain or loss.
  5. It increases our work time hence we use it manually
I found that those were bogus reply from user whereas actual reason was problem of understanding.
So Now this article is going to explain you this concept in best simple way how to use Multi Currency Feature in Tally in best way.

 Important Concept of Multi Currency in Tally
Before moving ahead on we need to understand the following concept
  • Export & Import : When a domestic company deliver any goods or service outside geographical boundary of nation called export of goods or service. Similarly when domestic company any goods or services from different country called as Import Transaction
  • Inward/Outward Remittance : Amount received against Export Sales is called inward remittance and Amount paid against Import Purchase called outward remittance. These remittance are done according to currency selected for Invoicing.
  • Rate of Exchange (ROE) : Rate of exchange refers the conversion rate. It is the concept on which any currency gets converted to different currency.
Example : If you are travelling to DUBAI and you are carrying INR that wont help you there hence you need to convert those India Rupee to Dirham at specific rate. You need to visit money exchange point at airport or anywhere you need to surrender base currency and gets the different currency. Lets say you gave Rs95,000 to exchanger and he will check the conversion rate lets say Rs 19 per Dirham then he will give AED (Dirham) 5000 to you. (Charges of exchanger has been ignore).  The rate of exchange gets vary from time to time depending on economic situation.
  • Foreign Exchange Gain & Loss : This is most important concept under the chapter it is the amount which arise due to variation of rate of exchange. Lets understand this topic with example
You are about to visit Dubai after 1 month and you have Rs95,000 to convert in AED (Dirham) so you just google it and found that today’s rate of exchange is Rs18.50 per Dirham so according to this rate you will get = 95,000/18.5 =AED 5135 approx. You further google the trend rate and found that 1 month ago it was Rs 18 per Dirham so according to old rate you will be getting AED 5277 which is higher then current rate hence it can be said if you would have converted it one month ago you would have incurred Exchange Gain of 142 AED.

 Based on Trend rate you made assumption that after one month it may increase further and would be near about Rs 19 per Dirham and if you will convert it after one month you will getting 95000/19=5000 AED which is 135AED lesser then according to current ROE hence you would incurred Exchange loss of 135AED hence it is suggestable for you to convert it today to avoid the exchange loss.
(ROE may increase or decrease there is possibility of gain and loss both)
  • Realized and Unrealized Amount :  It is also one of important concept to know before moving further. Tally calculate gain or loss based on realized and unrealized amount. Realized amount refers to the amount which has been settled either fully or partially in case of partially then balance amount is called as unrealized amount.
Example : If company made an export sales of 10000 US$ on 1st Jan 2019 to
M\s AlfaCom and payment was received 4000 US$ on 24th March 2019 and no further amount was received till year end i.e 31st March 2019.
In this case out of total 10000US$ only 4000 US$ was received hence this amount can be said as realized amount and further balance was not received till year end hence 6000 US$ can be said as unrealized amount.
  • Closure of Books of Account or Year End Provision : It is most important concept as we can easily understand that there would be unrealized amount at end of year always hence those unrealized amounts need to be revalued at end of financial year and provisional gain or loss need to be book in books of accounts.
Example: Sales of 100$ was made on 21st March @ 65 Rs/US$ and till end of year it remains unpaid so this amount will be revalued with yearend ROE it may be as 66 Rs/US$ then there would be gain of Rs 1 per Dollar which need to be book in accounts. (It will be explained further in case studies)

 Case Study
Kanha India Pvt. Ltd. located in Mumbai are manufacture of furniture. Their total sales include 80% of export and rest of domestic sales. Manufacturing of furniture need foam which they Import from Nepal.
They have received order from Eclips Ltd LLC from USA to export  40 Furniture Set for USD$300.
To manufacture complete furniture, they placed an Purchase order to Pashupati Traders Nepal to deliver 100 KG foam @ USD$20 per KG.

 So above transaction took place on following dates
  1. 100KG Foam Imported from Pashupati Trader Nepal @ 20USD$/KG dated on 1st Jan 2019.
  2. 50% of Amount was paid to Pashupati Traders dated on 4th Jan 2019
  3. 40 Furniture Sets were exported Eclips Ltd LLC @300USD$ dated on 15th Jan 2019
  4. 90% of total amount was received from Eclips Ltd LLC was received on 20th Jan 2019
  5. No further amount was received or paid till 31st March 2019
(Please Note GST and any other Taxes has been ignored on above transactions)

 Rate of Exchange on specific dates were as follow :

Dates Rates of Exchange
1st Jan 2019 67 INR/USD$
4th Jan 2019 67.80 INR/USD$
15th Jan 2019 68.20 INR/USD$
20th Jan 2019 69 INR/USD$
31st Mar 2019 68.80 INR/USD$


Now to understand the above transaction and to simplified it we can classified above ttransactions in Import and Export Related Transaction
As we can see that Goods were imported on 1st Jan 2019 at 67INR/USD$ and 50% of amount was paid on 4th Jan 2019. When goods were imported the rate of exchange was 67 and payment was done at rate of 67.80 hence we made payment we made excess payment of 0.80INR per USD$

 Hence total excess payment done = 0.80 INR X 1000 USD$ =800 INR hence here we have incurred foreign loss on transaction of 800 INR

 Now unrealized amount i.e unpaid amount 1000USD$ which is unpaid till 31st March hence this should be revalued as per AS11 according to ROE on 31st March 2019.

 Now as on 31st March 2019 there is excess difference of 1.80 INR/USD = 1.80 x 1000USD  =1800 INR

 Hence as on 31st March 2019 on provisional basis 1800 INR is further exchange loss. This loss is based on provisional basis and actual loss can be calculated based on actual payment date.

 So total Transaction description as below :
  1. Import Purchase $2000@67INR/$=1,34,000 INR
  2. Paid 50% amount i.e $1000@67.80INR/$ =67,800 Now in this case purchase was done at 67INR/$ and payment done @ 67.80/$ hence paid 0.80INR/$ Extra, so total excess amount paid is = 0.80 X $1000 = 800Rs. So this amount will be treated as foreign exchange loss.
  3. Now till year end no further payment has been done hence we need to book provisional gain or loss amount on unrealized amount i.e $1000 with Rate of Exchange dated on 31st March.
So Year end rate is 68.80INR/$ which is higher 1.80INR/$ then purchase rate it means there is further loss of 1.80INR/$. So total loss is =1.80 X $1000 =1800 INR. (This is provisional exchange loss called year end valuation.)

 Let See above entries in Tally
1- Purchase Entry: 1st Jan

 2- 50% Payment Entry

 3rd Entry Gain or Loss Entry on Payment
4th Entry
Year end valuation entry

Now above entry can be explained similarly to Import Transaction. Let us see in in details
  1. Export Sales done for $12000 @ 68.20INR/$
  2. 90% amount received i.e $10800@69 INR/$,it mean amount received is higher then sales rate by 0.80INR/$ so total excess INR received = 0.80INR X $10800 =8640 INR. This excess amount recevied called as exchange gain. (This is exchange gain on realized amount)
  3. No further amount was received till 31st March 2019 hence we need to book provisional gain or loss amount on balance amount i.e unrealized amount. Balance $1200, Year end ROE 68.80INR/USD$, Export sales done at 68.20INR/USD$ so with comparison we can identify that closure rate is higher then 0.60INR/USD$ it means there is gain of 0.60 Rs per Dollar. So total Gain is = USD$1200 X 0.60 INR = 720 INR.

Entry 1: Export Sales
2nd Entry : Receipt of Amount


 3rd Entry of Gain or Loss on receipt


 Above Entries are shown without configuration of master and ledgers.
Please note that year end provisional entry made is completely closure and provisional gain or loss entry and not actual gain or loss.
So there are few users who reverse the provisional entry on 1st April which can be done or divided.

 I hope you have this article has help you to understand this important feature in detail. I am open for any kind of suggestion feedback or query. You can reach me at anytime on mentioned mail id or WhatsApp no.

 Explaining complete scenario and transaction in this article is quite tough hence I have Witten E-Book on Multi Currency Feature in Tally you can refer the E-Book which contains the following content :
  1. Introduction of E-Book & Multi Currency Feature in Tally
  2. Different Important Concept under Multi Currency
  3. Master Configuration in Tally
  • Enabling Multi Currency Feature
  • Creation of Different Curreny
  • Party Masters
  • Sales and Purchase Ledger
  • Foreign Exchange Gain or Loss Ledger
  • Voucher Configuration  
4. Export Sales Related Transaction
  • Case Study 1: Simple Export Sales & Receipt of amount.
  • Case Study 2: Simple Export Sales & Receipt of amount in installments.
  • Important Note : How does Tally Show Gain or Loss amount in Balance Sheet
  • Case Study 3: Simple Export Sales & Part Receipt in current Financial year and balance in next financial year
  • Case Study 4: Advance Receipt & Export Sales against advance Receipt.
  • Case Study 5: Single Receipt of Amount against multiple Export Sales from Multiple Party
5. Import Purchase Related Transaction
  • Case Study 6: Simple Import Purchase & Payment of Amount
  • Case Study 7: Simple Import Purchase & Payment in Installment
  • Case Study 8: Simple Import Purchase & Payment in different financial year
  • Case Study 9: Advance Payment & Import Purchase against Advance Payment.
  • Case Study 10: Single Payment Entry against Multiple Purchase from Multiple Party
6. General FAQ
7. Shortcut Keys for Multiple currency

 To get this E-Book follow the below process
  1. Book is having Nominal cost of Rs151
  2. You can make payment of Rs151 via paytm or any other method
  3. Once you made the payment WhatsApp screenshot on 9699333653 and share your name and mail id
  4. Once it gets confirmed E-Book will be delivered to your mail box.
Delivery of E Book will start from 2nd Feb 2019. (For advance booking you can text me on whatsapp)

 Regards,
Parvez Ansari
GST AND TALLY WALA  (Check me out on youtube -Click Here 

 Regards
Parvez Ansari
GST AND TALLY WALA