About denominated accounts

If multi-currency support is activated (the Multi-currency accounting functionality is enabled in the Aktivera/inaktivera funktioner (CS100000) window), a general ledger account may be marked as denominated. A denominated account is one with a balance maintained in two currencies: the currency of denomination and the base currency.
The currency of denomination is often a foreign currency, but it can be the base currency too.
The foreign currency balance represents the actual holding of the company, whereas the base currency balance is just its reporting equivalent.

In comparison with ordinary accounts, denominated accounts have a few specific restrictions:

  • You can enter and post to denominated accounts only journal entries in denominated currency.
  • Denominated accounts cannot be used as direct or contra source accounts or destination accounts for allocations.
  • You cannot mark an accounts as denominated if it has at least one journal entry in a currency other than the currency of denomination.
  • Due to currency rate fluctuations, you may need to revalue balances of denominated accounts at the end of the period.

Because of these restrictions, you should denominate only accounts that absolutely must be denominated. Generally, these are the base accounts for cash accounts.

You can always cancel the account denomination by clearing the Currency field in the Kontoplan (GL202500) window.

A denominated account has two balances: one in the currency of denomination, and another in the base currency.
Each posted transaction updates both balances: foreign currency amounts update the foreign currency balance, and their base currency equivalents update the base currency balance. Because different transactions may use different exchange rates and even different rate types, the two balances of the denominated account do not relate to one another by any particular exchange rate or rate type.

The rates of nearly all major foreign currencies fluctuate frequently due to changing market conditions.
At the period end, cash, assets, and liabilities denominated in foreign currencies are revalued to reflect their current values.
During the revaluation process, the base currency balance is recalculated using an exchange rate effective at the date of revaluation.
The default rate type for revaluation is specified for each denominated account in the Kontoplan (GL202500) window.

The difference between the accumulated base currency balance and the calculated value is posted to the revaluation gain account or revaluation loss account, depending on the sign of the difference. Revaluation gains and losses are included in the net income for the current period.

Generally, revaluation is performed at the end of each financial period, but you can run it as often as needed, each time the results are adjusted with respect to the previous revaluation.

For each account denominated to a foreign currency, a rate type to be used for revaluations is specified in the Kontoplan (GL202500) window.

Parent topic:
Managing accounts

Related concepts
About account IDs
About foreign currency transactions

Related reference
Currency rates (CM301000)