Learn how to manage multiple currencies in TallyPrime with this step-by-step guide. Discover how to create foreign currency masters, configure exchange rates, record international sales and purchases, and calculate Forex Gain and Loss with practical accounting examples.
Multiple Currencies and Foreign Exchange Gain/Loss Entries in TallyPrime – Complete Guide
Businesses that deal with international customers, overseas suppliers, or foreign currency payments often need to record transactions in currencies other than their base currency. For example, an Indian company may maintain its accounts in INR but receive payments in USD, pay suppliers in EUR, or purchase services from a UK-based company in GBP.
TallyPrime supports multi-currency accounting, allowing businesses to record foreign currency transactions while maintaining their primary books in the base currency. It also helps account for exchange rate differences that arise when foreign currency transactions are settled at a different rate from the original transaction date.
In this guide, you will learn how to enable multiple currencies, create foreign currency ledgers, record international transactions, and account for foreign exchange gains and losses in TallyPrime using practical examples.
What Is Multiple Currency Accounting in TallyPrime?
Multiple currency accounting is the process of recording business transactions in different currencies while maintaining financial records in one primary currency.
For an Indian business, the base currency is usually Indian Rupees (INR). However, if the business deals with international customers or suppliers, it may need to record transactions in currencies such as:
USD – United States Dollar
EUR – Euro
GBP – British Pound
AED – United Arab Emirates Dirham
SGD – Singapore Dollar
JPY – Japanese Yen
TallyPrime allows you to define foreign currencies and their exchange rates. When you enter a transaction in a foreign currency, the software calculates its equivalent value in the base currency.
Practical example:
Suppose an Indian company sells products worth $1,000 to a customer in the United States.
On the invoice date:
Invoice amount: USD 1,000
Exchange rate: ₹84 per USD
Equivalent value: ₹84,000
TallyPrime records the transaction in USD while maintaining its equivalent value of ₹84,000 in the company's INR books.
This makes it easier to manage international transactions without maintaining separate accounting books for every currency.
Why Do Businesses Need Multiple Currency Accounting?
Multi-currency accounting is useful for businesses involved in international trade, overseas services, imports, exports, and foreign investments.
Some common situations include:
Receiving payments from international customers.
Paying overseas suppliers in foreign currencies.
Purchasing software subscriptions from international companies.
Recording export sales in USD or EUR.
Tracking outstanding foreign currency receivables and payables.
Calculating foreign exchange gains and losses.
Without proper currency accounting, businesses may struggle to identify the actual value of international transactions and the financial impact of exchange rate movements.
How to Enable Multiple Currencies in TallyPrime
Before recording foreign currency transactions, you need to create the required currency masters in TallyPrime.
Follow these steps:
Open your company in TallyPrime.
Press Alt+G (Go To).
Select Create Master.
Search for and select Currency.
Choose Create to add a new currency.
Enter the required currency details.
Press Ctrl+A to save.
For example, if you want to record transactions in US Dollars, enter the following details:
Field | Details |
|---|---|
Symbol | $ |
Formal Name | US Dollar |
ISO Currency Code | USD |
Number of Decimal Places | 2 |
Word Representing Amount After Decimal | Cent |
Suffix Symbol to Amount | As required |
Add Space Between Amount and Symbol | As required |
The currency symbol, formal name, ISO code and decimal settings should match the currency you are creating.
After saving the currency, you can use USD in your sales, purchase, receipt and payment transactions.
To create additional currencies: Repeat the same process for EUR, GBP, AED or any other currency required by your business.
How to Set Exchange Rates in TallyPrime
Creating a currency is not enough. You also need to define its exchange rate against your company's base currency.
For example:
Base currency: INR
Foreign currency: USD
Exchange rate: 1 USD = ₹85
TallyPrime uses the applicable exchange rate to calculate the INR value of foreign currency transactions.
Steps to define an exchange rate:
Press Alt+G (Go To).
Select Alter Master.
Choose Currency.
Select USD or the required foreign currency.
Go to the Rate of Exchange section.
Enter the applicable date and exchange rates.
Specify the Standard Rate, Selling Rate and Buying Rate, wherever applicable.
Press Ctrl+A to save.
You can maintain different exchange rates for different dates. This is important because the exchange rate on an invoice date may be different from the rate on the payment date.
You can also manage rates for several currencies together through:
Alt+G → Chart of Accounts → Currencies → Alt+H (Multi-Masters) → Rate of Exchange.
How to Create a Foreign Currency Ledger in TallyPrime
Once the currency is created, you can configure ledgers for customers, suppliers and bank accounts.
For example, suppose your company exports products to a customer in the United States. You want to maintain the customer's account in USD.
Follow these steps:
Press Alt+G (Go To).
Select Create Master → Ledger.
Enter the customer name, such as ABC International.
Select Sundry Debtors as the group.
Configure the currency option, if available.
Select USD as the ledger currency.
Enter other required details.
Press Ctrl+A to save.
Important: You do not always need to create a foreign currency ledger. TallyPrime also allows you to record transactions in foreign currencies using ledgers maintained in your base currency.
For ordinary customer and supplier accounts, retaining the base currency can be useful when you need bill-wise outstanding tracking. Assign a foreign currency to a ledger when you specifically need its balance maintained in that currency, such as a foreign currency bank account.
How to Record a Foreign Currency Sales Entry in TallyPrime
Let's understand the process with a practical example.
Suppose an Indian company sells products worth USD 1,000 to an overseas customer.
Sales invoice details:
Particulars | Amount |
|---|---|
Customer | ABC International |
Invoice Amount | USD 1,000 |
Exchange Rate | ₹85 |
Base Currency | INR |
INR Equivalent | ₹85,000 |
Follow these steps:
Press Alt+G → Create Voucher.
Select F8 (Sales).
Choose the customer ledger.
Select the sales ledger.
Enter the item or service details.
Enter the invoice amount in USD.
Specify or verify the applicable exchange rate.
Check the INR equivalent.
Save the voucher using Ctrl+A.
Accounting entry:
Account | Debit | Credit |
|---|---|---|
ABC International | ₹85,000 | – |
Sales Account | – | ₹85,000 |
The customer owes USD 1,000, while the corresponding sales value in the company's books is ₹85,000.
The actual voucher screen and available currency fields may vary depending on your ledger configuration and TallyPrime release.
How to Record a Foreign Currency Purchase Entry
The same multi-currency facility can be used when purchasing goods or services from overseas suppliers.
Consider this example:
An Indian company purchases software services worth USD 500 from a US-based supplier.
Purchase amount: USD 500
Exchange rate: ₹85
INR equivalent: ₹42,500
Steps to record the purchase:
Press Alt+G → Create Voucher.
Select F9 (Purchase).
Choose the foreign supplier ledger.
Select the purchase or expense ledger.
Enter the purchase amount in USD.
Enter or verify the exchange rate.
Check the INR equivalent.
Save the voucher.
Accounting entry:
Account | Debit | Credit |
|---|---|---|
Software Expense | ₹42,500 | – |
ABC US Supplier | – | ₹42,500 |
This records the purchase in your accounting books while retaining the foreign currency amount for reference.
How to Record Foreign Currency Payment in TallyPrime
When you pay an overseas supplier, the exchange rate may have changed since the original purchase invoice.
Suppose you recorded a purchase of USD 500 at ₹85 per dollar.
Original liability:
USD 500 × ₹85 = ₹42,500
Later, you pay the supplier when the exchange rate is ₹86 per dollar.
Actual payment:
USD 500 × ₹86 = ₹43,000
Your company pays ₹500 more than the original recorded liability. Therefore, it incurs a foreign exchange loss of ₹500.
Steps to record the payment:
Press Alt+G → Create Voucher.
Select F5 (Payment).
Choose the supplier's ledger.
Select the foreign currency bank or payment ledger.
Enter the amount paid in USD.
Verify the applicable exchange rate.
Select the relevant bill reference, where applicable.
Save the voucher.
The difference between the original liability and the settlement value represents the foreign exchange loss. TallyPrime handles the foreign exchange adjustment according to the applicable rates and transaction configuration.
What Is Foreign Exchange Gain and Loss in TallyPrime?
Foreign exchange gain or loss occurs when the exchange rate changes between the date of a foreign currency transaction and the date it is settled or revalued.
There are two possible outcomes:
Foreign Exchange Gain: You receive more INR than the original recorded value of a foreign currency receivable, or pay less INR than the original recorded value of a foreign currency payable.
Foreign Exchange Loss: You receive less INR than the original recorded value of a foreign currency receivable, or pay more INR than the original recorded value of a foreign currency payable.
Practical Example of Foreign Exchange Gain
Suppose an Indian company sells products worth USD 1,000 to an overseas customer.
Particulars | Details |
|---|---|
Invoice Amount | USD 1,000 |
Invoice Exchange Rate | ₹85 |
Original Invoice Value | ₹85,000 |
Payment Exchange Rate | ₹86 |
Actual Amount Received | ₹86,000 |
Forex Gain | ₹1,000 |
The company originally recorded a receivable of ₹85,000. However, when the customer pays, the company receives ₹86,000.
Therefore, the company earns a foreign exchange gain of ₹1,000.
Practical Example of Foreign Exchange Loss
Now consider the opposite situation.
An Indian company purchases goods worth USD 1,000 from an overseas supplier.
Particulars | Details |
|---|---|
Purchase Amount | USD 1,000 |
Purchase Exchange Rate | ₹85 |
Original Purchase Value | ₹85,000 |
Payment Exchange Rate | ₹86 |
Actual Payment | ₹86,000 |
Forex Loss | ₹1,000 |
The company originally recorded a liability of ₹85,000 but eventually paid ₹86,000.
The additional ₹1,000 is a foreign exchange loss.
How to Create a Forex Gain or Loss Ledger in TallyPrime
Before adjusting foreign exchange differences, you should create the appropriate ledger.
You can maintain separate ledgers for foreign exchange gains and losses.
Steps to create a Forex Gain Ledger:
Press Alt+G → Create Master → Ledger.
Enter the name as Forex Gain.
Select Indirect Incomes as the group.
Save the ledger.
Steps to create a Forex Loss Ledger:
Press Alt+G → Create Master → Ledger.
Enter the name as Forex Loss.
Select Indirect Expenses as the group.
Save the ledger.
These ledgers help you identify foreign exchange income and expenses separately in your Profit and Loss Account.
How to Adjust Foreign Exchange Gain or Loss Using a Journal Voucher
TallyPrime provides a dedicated Journal Voucher Class for adjusting foreign exchange gains and losses.
This is useful when unadjusted forex differences appear in the Balance Sheet.
Step A: Create a Journal Voucher Class
Press Alt+G (Go To).
Select Alter Master.
Choose Voucher Type.
Select Journal.
Enter a voucher class name, such as Forex Gain or Loss.
Set Use Class for Forex Gain/Loss Adjustments to Yes.
Select the Forex Gain or Forex Loss ledger.
Press Ctrl+A to save.
Step B: Record the Forex Adjustment
Press Alt+G → Create Voucher.
Select F7 (Journal).
Choose the Forex Gain or Loss voucher class.
Select the relevant ledger.
Enter the adjustment amount.
Verify the details and save using Ctrl+A.
After adjustment, the corresponding amount is transferred to the Profit and Loss Account instead of remaining under Unadjusted Forex Gain/Loss in the Balance Sheet.
You can create multiple Journal Voucher Classes for different currencies if required.
How to Check Foreign Currency Transactions in TallyPrime
After recording foreign currency transactions, you should regularly review your accounting reports to ensure that the foreign currency balances and their INR equivalents are correct.
You can check the following reports:
Report | Purpose |
|---|---|
Day Book | View foreign currency vouchers |
Ledger Vouchers | Check customer and supplier transactions |
Outstanding Reports | Review pending receivables and payables |
Balance Sheet | Check unadjusted forex differences |
Profit & Loss Account | Review forex gain and loss |
Forex-related adjustments | Review adjustment entries |
You can also view financial reports in a foreign currency using the Alter Column option in supported reports.
Difference Between Realised and Unrealised Forex Gain or Loss
Understanding the difference between realised and unrealised foreign exchange differences is important for accurate accounting.
Basis | Realised Forex Gain/Loss | Unrealised Forex Gain/Loss |
|---|---|---|
Meaning | Difference arising when a transaction is settled | Difference arising from revaluation of an outstanding balance |
Transaction Status | Settled | Still outstanding |
Example | Customer pays USD 1,000 at a changed rate | Customer still owes USD 1,000, but the closing rate changes |
Accounting Impact | Recognised on settlement | Recognised through applicable period-end adjustments |
Purpose | Record actual exchange difference | Reflect the updated value of monetary balances |
For example, if a customer owes you USD 1,000 and the exchange rate changes before the financial year ends, the INR value of the outstanding receivable may also change.
This difference needs to be evaluated and accounted for according to the applicable accounting standards and your company's accounting policy.
Common Mistakes to Avoid in Multi-Currency Accounting
Even though TallyPrime simplifies foreign currency accounting, incorrect configuration can create problems in financial reports.
Here are some common mistakes to watch out for:
Using incorrect exchange rates: Always verify the applicable exchange rate before recording a transaction.
Ignoring transaction dates: Exchange rates should correspond to the correct transaction or settlement date.
Creating duplicate currencies: Avoid creating multiple currency masters for the same currency unnecessarily.
Using the wrong currency ledger: Check whether the ledger should use INR or a foreign currency.
Ignoring forex differences: Review outstanding foreign currency balances regularly.
Not checking bill references: Match payments and receipts with the correct outstanding invoices.
Skipping period-end adjustments: Review unrealised forex differences before finalising financial statements.
Changing exchange rates without checking previous entries: Rate changes can affect the recalculation of foreign exchange differences.
A good practice is to maintain a consistent exchange rate policy and review foreign currency balances at regular intervals.
Benefits of Using Multiple Currencies in TallyPrime
Multi-currency accounting offers several advantages for businesses that deal with international customers and suppliers.
Better international accounting: Record sales, purchases, receipts and payments in different currencies.
Accurate financial reporting: Maintain the equivalent value of foreign currency transactions in your base currency.
Easy exchange rate management: Define rates for specific dates and update them when required.
Forex gain and loss tracking: Identify the financial impact of currency fluctuations.
Improved business control: Monitor foreign currency receivables, payables and bank balances.
Simplified accounting: Manage international transactions within the same company data instead of maintaining separate accounting books for each currency.
Frequently Asked Questions (FAQs)
1. Can I use multiple currencies in TallyPrime?
Yes. TallyPrime allows you to create multiple foreign currencies, define exchange rates and record transactions in different currencies.
2. How do I create USD currency in TallyPrime?
Press Alt+G, select Create Master, choose Currency, enter the USD details and save the currency.
3. What is Forex Gain in TallyPrime?
Forex gain occurs when an exchange rate movement benefits your business, such as receiving more INR than the original value of a foreign currency receivable.
4. What is Forex Loss in TallyPrime?
Forex loss occurs when exchange rate movements increase your payment obligation or reduce the INR value of a foreign currency receivable.
5. How do I adjust Forex Gain or Loss in TallyPrime?
Create a Forex Gain or Loss ledger, configure a Journal Voucher Class for forex adjustments and record the adjustment through F7 Journal.
Conclusion
Multiple currency accounting in TallyPrime makes it easier for businesses to manage international sales, purchases, payments and receipts. By creating currency masters, defining exchange rates and recording transactions correctly, you can maintain accurate foreign currency records alongside your base currency accounts.
The foreign exchange gain and loss feature is equally important because exchange rate movements can affect the actual profitability of international transactions.
Make it a regular practice to review outstanding foreign currency balances, verify exchange rates and adjust forex differences before finalising your financial statements. This will help keep your accounting records accurate and organised.
Disclaimer: This article is intended for educational purposes and explains the general process of multi-currency accounting in TallyPrime. Exchange rate treatment and foreign exchange adjustments should follow applicable accounting standards, tax regulations and professional accounting advice. Menu options may vary depending on your TallyPrime release and configuration.
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