Both Systems in Combination
The
simple conversion system is applicable to the majority of worldwide Currency transactions, while the
Dual-Base system can be useful for companies that have offices in two countries that need to
report in both Currencies, for companies operating in countries where there is a second Currency (usually the US Dollar or Euro) in common use in addition to the national one, and for companies in the Euro zone who retain their old national Currency for comparison purposes.
In some situations it may be necessary to use both systems in combination (i.e. to use both the Currencies, Languages and Advanced Pricing and the Dual Base Currency Value Packs). For example:
- a company operating in a country where there is a second Currency in common use in addition to the national one may trade with another country;
- a company with offices in two countries may trade with a third country;
- a company in a country passing through the transitional process of replacing its home Currency with the Euro may trade with a country outside the Euro zone. In this case, direct conversions from the home Currency to any foreign Currency except the Euro are not possible under EMU rules. Instead, the home Currency should first be converted to the Euro, and there should then be a second conversion to the foreign Currency. At the time of writing, there were no countries undergoing the transitional process, but future enlargement of the EU was imminent.
If you need to use both conversion systems in combination, follow the steps numbered below:
- Enter the Currencies used in your business using the Currency register in the System module.
- Using the Base Currency setting in the System module, define the two Currencies that are to be treated as Base Currencies.
Companies in the Euro zone retaining their old Currency for comparison purposes should have the Euro as Base Currency 1 and the Default Base Currency and the old national Currency as Base Currency 2.
Other voluntary users of the Dual-Base system should have their home Currency as Base Currency 1 and the Default Base Currency and their second Currency (e.g. Euro or US Dollar) as Base Currency 2.
Companies in transitional countries should have their national Currency as Base Currency 1 and the Default Base Currency and the Euro as Base Currency 2.
- Define conversion rates between the two Base Currencies using the Base Currency Rates setting in the System module.
- Define conversion rates between your Base Currencies and the foreign Currencies using the Exchange Rate register in the System module.
Voluntary users of the Dual-Base system will usually need Exchange Rates between foreign Currencies and Base Currency 1. However, they can also relate foreign Currencies to Base Currency 2 if necessary. This includes users in the Euro zone retaining their old Currency for comparison purposes.
Users in transitional countries should only enter Exchange Rates between foreign Currencies and the Euro (Base Currency 2). Exchange Rates between the home Currency and foreign Currencies, and between the home Currency and the Euro should not be entered.
- Using the 'Exchange Rate' card of the Account Usage S/L setting in the Sales Ledger, define Accounts to be used for gains and losses resulting from Currency conversions of Sales Ledger transactions. The Round Off and Bank Fee Accounts on this screen should also be considered.
- Repeat step 5 for Purchase Ledger transactions using the 'Exchange Rate' card of the Account Usage P/L setting.
Please click the links for detailed descriptions of each step.
