Tally is a popular accounting software that has been used by businesses worldwide for over three decades. It is known for its user-friendly interface and powerful features that help in managing various financial transactions. One of the most common issues faced by businesses using Tally is the unadjusted forex gain/loss. In this article, we will discuss how to remove unadjusted forex gain/loss in Tally.
What is Unadjusted Forex Gain/Loss?
Before we dive into the process of removing unadjusted forex gain/loss in Tally, let’s first understand what it is. Unadjusted forex gain/loss is a term used to describe the difference between the exchange rate used for a transaction and the rate at which the transaction is settled. This difference can result in a gain or a loss for the business, depending on whether the exchange rate has gone up or down.
For example, let’s say a business in India purchases goods worth $10,000 from a supplier in the US. At the time of the transaction, the exchange rate is Rs. 70/$. The business records the transaction in Tally at this exchange rate, which means the total cost of the goods in Indian rupees is Rs. 7,00,000.
Now, let’s say the payment is made two weeks later, and the exchange rate has changed to Rs. 72/$. This means that the business has to pay Rs. 7,20,000 to settle the transaction. However, since the transaction was recorded at Rs. 70/$ in Tally, there is a difference of Rs. 20,000. This difference is the unadjusted forex gain/loss.
Why is it Important to Remove Unadjusted Forex Gain/Loss?
Unadjusted forex gain/loss can impact a business’s financial statements and give a false impression of its financial health. It can also lead to tax implications and penalties if not addressed in time. Therefore, it is essential to remove unadjusted forex gain/loss from Tally to ensure accurate financial reporting.
How to Remove Unadjusted Forex Gain/Loss in Tally?
Now that we understand what unadjusted forex gain/loss is and why it is important to remove it, let’s discuss how to do it in Tally.
Step 1: Create a Forex Gain/Loss Ledger
The first step is to create a Forex Gain/Loss ledger in Tally. To do this, go to Gateway of Tally > Accounts Info > Ledgers > Create. Enter the name of the ledger as Forex Gain/Loss and select the option “Indirect Expenses” under the “Group” field. Save the ledger.
Step 2: Record the Forex Gain/Loss
Once the Forex Gain/Loss ledger is created, you can record the forex gain/loss entries in Tally. To do this, go to Gateway of Tally > Accounting Vouchers > F7 (Journal). Enter the date of the transaction and select the Forex Gain/Loss ledger under the “Debit” field. Enter the amount of the unadjusted forex gain/loss in the “Amount” field.
Under the “Credit” field, select the appropriate ledger, such as the bank account or the accounts payable account. Enter the same amount in the “Amount” field as the debit entry. Save the journal entry.
Step 3: Adjust the Forex Gain/Loss
The next step is to adjust the forex gain/loss entries in Tally. To do this, go to Gateway of Tally > Display > Statutory Reports > Forex Gain/Loss. Select the period for which you want to adjust the forex gain/loss entries.
The report will show the unadjusted forex gain/loss entries recorded in Tally. Select the “Adjustment” button to adjust the entries. Tally will automatically adjust the entries and show the adjusted forex gain/loss in the report.
Step 4: Finalize the Forex Gain/Loss
The final step is to finalize the forex gain/loss entries in Tally. To do this, go to Gateway of Tally > Display > Statutory Reports > Forex Gain/Loss. Select the period for which you want to finalize the forex gain/loss entries.
The report will show the adjusted forex gain/loss entries recorded in Tally. Select the “Finalize” button to finalize the entries. Tally will automatically adjust the entries and show the final forex gain/loss in the report.
Conclusion
Removing unadjusted forex gain/loss in Tally is crucial to ensure accurate financial reporting and avoid tax implications. By following the simple steps outlined in this article, businesses can remove unadjusted forex gain/loss in Tally and ensure accurate financial reporting.
