Exchange Rate Revaluation
To update the values of foreign currency accounts in your General Ledger according to current exchange rates, utilise ERPNext's Exchange Rate Revaluation feature. When you keep accounts in currencies other than the base currency of your business, such as bank balances, payables, or receivables, this is crucial.
The system enables you to adjust these balances to reflect the current exchange rate when it changes, guaranteeing that your financial statements are correct at closing. In order to match real-time foreign exchange impacts, this is typically done during financial closing at the end of the month or year. The gain or loss resulting from rate differences is computed by ERPNext and recorded in the Exchange Gain/Loss account.
ERPNext will automatically compute the adjustment journal entries to update your books based on the date, company, and currency you specify using the Exchange Rate Revaluation master.
To access the Exchange Rate Revaluation list, go to:
1. How to Setup Currency In ERPNext
1.1. From Chart of Account (while craeting an account)
Go to Accounts > Chart of Accounts.
Click on Add Child under the parent group (e.g., Bank Accounts or Receivables).
In the Account Currency field, select the currency you want (e.g., USD, EUR).
Fill other details and Save.
1.2. For an Existing Account (modify currency):
Go to Accounts > Chart of Accounts.
Click on the specific account (e.g., "Bank - USD").
Click Edit.
In the Account Currency field, change or assign the required currency.
Save the account.
2. How to Enable Exchange Rate Revaluation
2.1. First, Make Sure You Have Accounts In Multiple Currencies
Only if your business uses multiple currencies, in its chart of accounts will the Exchange Rate Revaluation feature be functional.
For instance: This tool is helpful if your base currency is PKR but you have a bank or receivable account in USD or EUR.
2.2. Set the Unrealised Exchange Gain/Loss Account
Go to: Setup > Company > Select your company.
Find the "Unrealised Exchange Gain/Loss Account" field in the Company settings, then choose an income or expense account (often referred to as "Exchange Gain/Loss"). When currency balances are revalued by the system, the difference will be posted to this account.
2.3. Go to Exchange Rate Revaluation
Go to: Accounts > Revaluation of Exchange Rates > New.
This is the main screen where you will create a journal entry to modify account values according to the most recent exchange rate.
2.4. Select Company and Click "Get Entries"
Click the "Get Entries" button after selecting your business in the form.
In order to get them ready for revaluation, ERPNext will look through all General Ledger accounts that have a currency other than the company's base currency.
2.5. System Fetches Exchange Rates
ERPNext will make use of any manually defined exchange rates that are present in the Currency Exchange DocType. Otherwise, if the system is linked to a rate provider, it will attempt to automatically retrieve the most recent market rate.
2.6. Submit the Document for Revaluation
Click Submit on the Exchange Rate Revaluation document after the rates have been verified and the entries have been loaded. This attests to your desire to move forward with the modification.
2.7. Select "Create Journal Entry."
A button labelled "Create Journal Entry" will appear after submission. When you click it, a journal entry reflecting the profit or loss brought on by the exchange rate change will be created.
2.8. Submit the journal entry
After creating the journal, carefully check the credit and debit lines before clicking Submit. Your general ledger will be impacted, with the foreign currency accounts' values being updated and the difference being posted to the Exchange Gain/Loss account.