Foreign Currency Valuation 3

So now whatever the foreign currency valuation that we are going to take up, so foreign currency valuation, we have to do it with the help of an execution cycle. 

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So the path for that is Accounting, Financial Accounting, General Ledger, Periodic Processing, Closing, Valuate, FAGL_FC_VAL – Foreign Currency Valuation (New). Go here. So foreign currency by default, it will show you the previous month’s last date. Now we are in the month of November, foreign currency valuation has to be done on 31st of October now. By default, it will show you the date, 31st October. See here, valuation key date. 

I need not tell you, system understands foreign currency valuation has to be done every month end. So that’s why it is showing key date. Once the number is complete, it’ll take 30th number. Our company code on DRLB. We have already defined valuation area, D1. Right? Check ‘Create postings’. Batch input session name, we have seen batch input session in several earlier cases also, so I’m giving my name. So document date and posting date, in fact I need not give system, by default it will take on 31st. Anyhow, reversal date I’m giving on 01.11.2013. Reversal posting period system will take it. 

Now open items. So we are going to valuate the open items. Check ‘valuate vendor open items’. Vendor number, this is 400501 ABC raw materials suppliers. Reconciliation account, vendor reconciliation account I want to give, sundry debtors for raw material. Currency not required. 

Now let us see, execute it. 

 

So my requirement is that I want this accounting entry to be posted, both, and also reversal also I want.

Loss on foreign currency valuation, 300 to balance sheet adjustment account, 300. On 1st of November, I want balance sheet adjustment account 300, just exactly the same entry will be reversed. Now see here, only one entry we have posted. 

Here, 5 messages. What are the 5 messages? 

All are green. So no error messages. Meaning the process is okay. Amount in foreign currency we have posted 100 U.S dollar, amount in local currency is 6,000 when we have posted. See, exchange rate system picked up 63 automatically. From where in the table, OB08 we have posted. We have given the exchange rate on 31st October as 63, that’s why the system has picked up exactly 63. How system has picked up? Because in the valuation method, we have given that valuation, the exchange rate picked up should be average rate. You remember? So here, Financial Accounting (New), General Ledger Accounting, Periodic Processing, Valuate, Define Valuation Methods. DRVC we have defined, Foreign Currency Valuation Method for Vendors and Customers. Here, we told system exchange rate type for debit balance or credit balance should be average, M. Because of this, the system has picked up 63. Now the original exchange rate is 60, and the exchange rate given based on 31st October is 63. See, valuation difference, 300 rupees. Amount posted, 300. Now batch input session, we need to execute. Because what is batch input session? It means whatever the line items that system is going to identify here. Here, we have only one line item I have shown you for the sake of our convenience. So in case of real scenario, you’ll have hundreds of line items because whenever you procure any material, all the line items the system will pick up, not only vendors. Simultaneously, the system will pick up vendors and customers both. And all the things if you want to post the accounting entry, through batch input session you have to take it up. So in order to execute batch input session, go to Systems, Services, Batch Input, Sessions. 

So this we have done in case of recurring data entry, batch input session we have executed. It will take us to the t code SM35.

See latest session, Anand, foreign currency valuation. Select it. Click on process. You can take process foreground or process background. So let me take process foreground only. We’ll see how system is going to post accounting entries. Click on ‘Process’.

You can take ‘process foreground’ or ‘process background’. So let me take process foreground only, we’ll see how system is going to post accounting entries. Click on ‘Process’.

Now, first on 31.10.2013, SA document type, account 400506. Let us see, press Enter. 

See, the system has picked up loss on foreign currency valuation unrealized on 31st October. So this is my requirement, the system is also giving me the same. Here, amount in USD is not showing, only the amount in INR is showing, 300. And this balance sheet adjustment account is going to be credited, that is what system is doing. Business area if you want, you can enter, otherwise just pick it up. So one entry is over. 

Second entry should be reversal, reversal on 1st November.

So here, document date, posting date. See here. Document date is 31.10.2013, posting date is going to be first 01.11.2013. Here, loss on foreign currency unrealized is going to be credited, balance sheet adjustment account will be debited. 

See balance sheet adjustment account system is giving. Even narration also the system is giving. Everything is perfectly set by the system. 

Now batch input session is with a green tick, means completed. Come back. Now look at the accounting entries. Go to FB03. 

34 and 33, the two entries are posted. 

First entry on 31.10.2013, loss on foreign currency valuation unrealized, 0. When in USD, it is 0, also balance sheet adjustment account. See the display currency.

Then INR is 300 rupees, the same entry I wanted, everything the system automatically posted, we have not touched anything.  We have executed the process, that’s all. Since the foreign currency valuation is unrealized, we need to reverse it. Yes, that is my business requirement I have taken on 31st October, and that is the reason we have reversed it. Because this is a fictitious entry, and I don’t want this entry to be continued. That’s why I reversed it. This is only for the sake of preparing my financial statement I have prepared this entry. So this, I want it reversed, so the system has reversed it. Document number 33, this is 31/10, 31/10 for document date and posting date. 

See 34th entry. 

Loss on foreign currency valuation unrealized account is credited and balance sheet adjustment is debited. Exactly reversed. Same amount 300 rupees INR. So like this, I have shown you only one entry. If you have 1,000 entries, all entries the system on a particular date, whatever the exchange rate that we are going to define will be picked up, and the differential amount will be posted as accounting entries. So on 31st of October, my requirement is done with. 

Let’s suppose on 6th of November I’m making payment to vendor now. How much I have to pay? Vendor, $100. And my vendor is least bothered at what price I’m buying it, he wants $100. So I have to pay him $100. But now the exchange rate is going to be 65 rupees. So I have to shell down 65 rupees to buy 1 U.S dollar. So that is nothing but 6,500 I have to shell down in order to buy 100 U.S dollar. Let us post the entry now. So this entry manually I’m posting. I’m making the payment to Vendor. Go to Accounts payable, Document Entry, Outgoing Payment, Post. I can take even F-58 also, you can pay through check. Anyhow, I’m posting an accounting entry here. On 6th, today’s date itself I’m taking. See, this entry is posted by accounts department. Foreign exchange rate is going to be decided by finance department, they are the department responsible for buying the foreign exchange. So that’s why what we do here, payment is done in USD.  What is exchange rate today, so finance department will inform us, today whatever the payment that you are going to make, you take the value as 65 rupees per USD. So, I’m taking 65. Now bank account, 200405. Amount, 100 US dollars I’m paying. My vendor, ABC raw material vendor. Test for foreign currency valuation. So vendor payment, of course. 

Process open item. Message: Exchange date 65 deviates from the table date of 63. Least bothered. Because it is the responsibility of the system to inform us. Because 63 we have given on 31st October, that’s why it is showing us the message. Press Enter. 

Message: Exchange rate 65 deviates from table rate. It is only a warning, not an error message. Press Enter.

See, 100 US dollars. $100, $100. Now what I can do, I can post the entry. If you  just click on Overview, if you don’t get it, of course, simulate. 

Right. Let me post it. Axis Bank account is credited and ABC Raw Material, the supplier’s account is debited. His account is debited, bank account is credited. Save it. Look at the entry now. 

Click Display.

In US dollar, the system is going to post, Axis Bank account is credited, and vendor account is going to be debited. Loss on foreign currency valuation realized, 0. In USD, it is 0. When you Display currency,

See, 500 rupees. So exactly whatever the configuration we have done, that is working fine, this is what I wanted. So vendor account is going to be debited, bank account is credited, debit loss on foreign currency valuation, INR 500. The same entry system has given me. Remember that whatever the process that we have discussed that is business process requirement as per the business requirement of the company, the client requirement, so the same thing we have mapped into the SAP system, and it’ll give you the exact results, it has to give. This will ultimately be going to the profit and loss account. You can see the 400505 through FS10N. 

So, ultimately debit balance, this one, loss on foreign currency valuation realized. This will go to P and L account. Like this, we can post any number of entries. Now you can work in the notes, whatever I have given you is from customer’s side. Whatever I have discussed here is vendor and we got loss, same thing that is the notes that I have given customer wise. So instead of purchases, procurement, there I have given the notes as sales. So unless you practice all these steps and you execute on your own, you cannot get a proper idea about it. And if you are going to keep this in your CV, that is cross company code postings, foreign currency valuations, these are the certain important topics. If you are going to keep in your CV and if you are able to answer it properly, your chances of getting a job will be much higher, because these are certain things. Generally, the people who do not have real time experience cannot answer. But you need to work a lot on this. So one vendor, one customer item, you try. You post it. Not only 1, post 2-3 line items. Observe the differences and find out the loss or gain. See whether it is posting properly or not. Again, go to the configuration settings, observe which one is exactly working for getting the results. 

So this is the topic foreign currency valuation. Next, we have two more topics, one is bank reconciliation. See, when you observe these miscellaneous topics, whatever I’m discussing, they are a bit tricky. So we have seen GL, AR, AP, Asset Accounting, the total topics in each sub module like ER, AP and submodules, all will be around only that one. Account receivables means that, all the topics will be around the account receivables only. But here, in this case, accounts receivable, accounts payable, different topics will be covered, and total business process you need to understand here.