Configuration of Foreign Exchange

Foreign Currency Valuation Configuration 

Step-I: Define standard quotation for exchange rate

Path: General Setting> Currencies> Define Standard quotation for exchange rate

Click on New Entries

Step-II: Check exchange rate type

Path: General Setting> Currencies> Check exchange rate type

Always choose Exchange Rate Type- M- Standard translation rate at average rate

Step-III: Define translation ratios for currency translation

Path: General Setting> Currencies> Define translation ratio for currencies translation

Click on New Entries

And Save

Step-IV: Enter exchange rate

Path: General Setting> Currencies> Enter exchange rate

Click on New Entries

Step-V: Open 3(Three) Accounts for Foreign Exchange Transaction using FS00

1.)     Exchange gain A/c.

2.)     Exchange loss A/c.

3.)     Forex clearing A/c. or Balance Sheet Adjustment A/c.

Note: Instead of opening two accounts (Exchange gain and Exchange loss) we can open one account as

Exchange gain/loss Account
Step-VI: Parallel valuation method

Path: Financial Accounting > Financial Accounting global setting > Company Code > Parallel valuation method > Foreign currency valuation > Prepare automatic posting for foreign currency valuation

Click on KDF- Exchange rate difference: Open items/ GL accounts

Put Chart of Account and click on New Entries