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Open Item Clearing

Apr 27 at 11:16 AM

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Former Member

Please explain the logic for clearing open item when it comes to currency?

We want to know what type of currency is the clearing based i.e.doc currency/local currency/group currency i.e in which currency clearing happens.

BR

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3 Answers

Sanil Bhandari Apr 30 at 04:11 AM
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Hi Former Member

I believe I have answered this question earlier as well and pointed out to SAP help. Never the less, explaining the concept of clearing again.

Take a company code has INR as the company code currency and USD as the group currency. Now for the company code you have posted an invoice in EUR. As soon as the open item is posted in EUR, it will show up as an open item. Suppose this is posted on April 30 and you will pay this item on May 10. If you pay the invoice in EUR, which is the document currency, there would be difference in Exchange rates (EUR/INR and INR/USD). This exchange rate will have to charged off to P&L and is known as realized gain or loss. Since the invoice and payments are in EUR, there would be no differences, however, you will see amounts in INR and USD for the differences.The accounting entry for clearing document would be as under, assuming you are making an AP Payment:

EUR (Doc Curr) INR (Local Curr) USD (Group Curr)

A/P A/c Dr 100 86000 67000

To Bank 100 80000 66000

To realized FX Gain /Loss 0 6000 1000

If you see above accounting entry, there is a loss/gain of INR 6000 and USD 1000 due to exchange rate diff, which is arising out due to difference in exchange rate of EUR/INR and INR/USD. All of above are arbitary exchange rates

Now assuming the payment was done in INR and not in EUR. For eg, EUR/INR was 86 on the day of invoice and 80 on payment date. If your invoice was 100 EUR and if you pay the same amount in INR, you will have to pay INR6000 less and you will still pay 100 EUR to your vendor.

The best practice in the above case, is that you pay in the Document Currency so that foreign exchange gain/loss are posted automatically. Also it is a legal requirement in certain countries like Argentina to report the gain/loss in a seperate gl account and calculate tax on the same. At the end of day, all the amounts in LC, DC and GC should be zero, if your trial balance has to be zero.

Let me know if you have further questions.

Regards

Sanil Bhandari

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srilatha o Apr 30 at 06:46 AM
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Hi

very good explanation, but the invoice in EUR i want pay INR is it possible how will do this , please let me know .


Regards,

srilatha

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Sanil Bhandari Apr 30 at 09:02 AM
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Hi

You can technically pay the amount in INR. However, there will be difference in INR Amounts and you would have to book the difference in realized gain/loss account. Since in the above case, you would be booking invoice in EUR and your bank would still pay in EUR, why would you want to pay the invoice in INR. That does not make logical transaction. Also you would have to adjust the amount in Group Currency as well to make sure that they are zero.

regards

Sanil Bhandari

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