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SAP Functional, Basis Components, and ABAP Programming Books


Clearing in Local Currency

Effect of clearing in Local currency :-

Purchase USD 1000 at 1 USD = 2 XXD.  The accounting entry in Local Currency is

Purchase account      Dr      2000
Vendor    account      CR     2000

Paid when the exchange rate is 1 USD = 1.8 XXD.  In this case, the party is supposed to pay local currency equivalent to Foreign Currency and in this case will be 1800 XXD.   When he pays XXD 1800, the following accounting entries area passed :-

Vendor    account                               DR    2000
Bank       account                                CR   1800
Gain on Foreign Currency fluctuation    CR     200

At the time of clearing, the system expects the amount to be at the present exchange rates and the difference is posted to the Foreign Currency rate differences account.  If this differences are not required or the payment in local currency is expected to be paid at the exchange rates prevailing at the time of sale/purchase transaction took place, then there is a facility in company code Global settings screen to elimate the differences.  In this case and in the above example the receipt would be XXD 2000.  The differences are not recorded.

To set the clearing in local currency :-

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