What do you mean by ‘Balances in Local Currency’ Only?

When you create GL account master records, it is necessary to decide whether you want an account to have the transactions updated only in local currency. You will set this indicator accordingly in the ‘Company Code area’ of the master record. Make sure to set this indicator for clearing accounts such as:

  • Cash discount clearing accounts
  • GR/IR clearing accounts

Note that you need to set this indicator ‘on’ for all the ‘clearing accounts’ where you use the local currency to clear the line items in various currencies so that the transactions are posted without posting any exchange rate difference that otherwise might arise.

Example: Consider an invoice for USD 1,000, which on that day translates into an amount of INR 45,000 with an exchange rate of I USD=INR 45. Imagine that when the goods are received, the exchange rate was 1 USD=INR 44.

  • If the indicator is set, the system ignores the exchange rate as if the line items have been maintained only in the local currency (INR), and the items are cleared.
  • If the indicator is NOT set, the system makes a posting for the ‘exchange rate difference’ (INR 1, 000) before clearing the two line items.

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