what is lcy currency?

As companies operate in more countries/regions, it becomes essential that they are able to trade and report financial information in more than one currency. The local currency (LCY) is defined in the General Ledger Setup page as described in the article Understanding the General Ledger and the Chart of Accounts. Once the local currency (LCY) has been defined, it will be represented as a blank currency, so when the Currency field is blank, it means that the currency is LCY.

Next, you must set up currency codes for each currency that you use if you buy or sell in currencies other than your local currency (LCY). Also bank accounts can be created using currencies. It is possible to record G/L transactions in different currencies, however, the G/L transaction will always be posted in the local currency (LCY).

Your general ledger is set up to use your local currency (LCY), but you can set it up to also use another currency with a currency exchange rate assigned. By designating a second currency as a so-called additional reporting currency, Business Central will automatically record amounts in both LCY and this additional reporting currency on each G/L entry and other entries, such as VAT entries. For more information, see Set Up an Additional Reporting Currency. The additional reporting currency is most often used to facilitate financial reporting to owners that reside in countries/regions using different currencies than the local currency (LCY).

You must set up a code for each currency you use if you:

After setting up the codes, assign the appropriate code to each foreign currency bank account, and assign a default currency code to foreign customer and vendor accounts.

You specify the currency codes in the Currencies list, including extra information and settings that are necessary for each currency code.

You specify the currency codes in the Currencies list, including extra information and settings that are necessary for each currency code. For more information, see Currencies

When you receive an invoice from a company in a foreign currency, it is fairly easy to calculate the local currency (LCY) value of the invoice based on today's currency rate. However, the invoice often comes with payment terms so you can delay the payment to a later date, which implies a potentially different currency rate. This issue in combination with the fact that bank currency rates always differ from the official currency rates makes it impossible to anticipate the exact local currency (LCY) amount that is required to cover the invoice. If the due date of the invoice extends to the next month, you might also have to revaluate the local currency (LCY) amount at the end of the month. The currency adjustment is necessary because the new LCY value that is required to cover the invoice amount might be different, and the company debt to the vendor has potentially changed. The new LCY amount might be higher or lower than the previous amount and will therefore represent a gain or a loss. However, since the invoice has not been paid yet, the gain or loss is considered unrealized. Later, the invoice is paid, and the bank has returned with the actual currency rate for the payment. It is not until now the realized gain or loss is calculated. This unrealized gain or loss is then reversed, and the realized gain or loss is posted instead.

In the following example, an invoice is received on January 1 with the currency amount of 1000. At the time, the currency rate is 1.123.

At the end of the month, a currency adjustment is performed where the adjustment currency rate has been set to 1.125, which triggers an unrealized gain of 2.

At the time of payment, the actual currency rate registered on the bank transaction shows a currency rate of 1.120.

Here there is an unrealized transaction, and therefore it will be reversed together with the payment.

Finally, the payment is registered and the actual loss is posted to the realized losses account.

The exchange rates are the tool to calculate the local currency value (LCY) of each currency transaction. For more information, see Update Currency Exchange Rates.

You can use telebanking for trade with domestic and foreign customers and vendors. This topic describes a scenario where the trade is with foreign customers and vendors that use a different currency than your local currency.

Create vendor/customer and enter all necessary information. Special attention should be paid to the following fields:

Hernandez Ortiz (code ORTIZ) is one of our Mexican vendors. Purchase invoices will be paid through our national bank account (code ABN) to his bank account (code HOBA). While our bank account ABN is denominated in local currency (LCY), Hernandez Ortiz's bank account HOBA is denominated in Mexican peso (MXN). Therefore, on Hernandez Ortiz's vendor card, we set the Currency Code field to MXN, fill the Transaction Mode field with ABN that is linked to our bank account, ABN, and set the Bank Account field to HOBA.

Create vendor/customer bank account and enter all necessary information. Special attention should be paid to the following fields:

Hernandez Ortiz's bank account (code HOBA) is denominated in MXN. Therefore, on Hernandez Ortiz's vendor bank account card, we enter a valid number in the Bank Account No. field, set the Currency Code field to MXN, and fill the fields on the Owner Information FastTab with appropriate values.

Create a purchase/sales invoice and enter all necessary information. Special attention should be paid to the following fields:

By default these three fields will be populated with values taken from the vendor/customer card.

When the invoice is finished it can be posted.

When creating a purchase invoice for Hernandez Ortiz we enter ORTIZ in the Buy-from Vendor No. field. By default, the Currency Code, Transaction Mode, and Bank Account fields will be populated with values taken from the Hernandez Ortiz's vendor card. Therefore, the Currency Code, Transaction Mode, and Bank Account fields will be MXN, ABN, and HOBA respectively. Nevertheless, these values can be changed.

Open the Telebank - Bank Overview window and browse to the bank through which we want to perform our payment. Open the Proposal window and generate payment proposals using the Get Proposal Entries batch job.

Through the Telebank - Bank Overview window, we open the Proposal window for our bank, ABN. Using the batch job, one proposal line will be created for the purchase invoice we just created and posted for the vendor ORTIZ. The amount of the payment will be in local currency (LCY).

From the Proposal window, we process our proposal into a payment history. The proposal will disappear and can be found in the Payment History Overview window for the same bank.

We process our proposal concerning the payment to the vendor ORTIZ and open the Payment History Overview window for our bank, ABN. The last payment history is the one we just created.

Open the Payment History Overview window, browse to the relevant payment history and then choose the Export action. The export batch job will appear for the export protocol that is linked to this payment. For this export the system already has entered appropriate filters. Check, if wanted, any of the fields on the Options FastTab, and choose the OK button to export the payment. The system will generate a text file using a filename as defined in the Default File Names Field field of the export protocol, which now is ready to be sent to our bank.

As the transaction mode associated with our payment is ABN, the *BBV or PAYMUL batch job will appear.

After receiving electronic bank statements from our bank we can import them by running the appropriate import protocol from the Import Protocol List window.

The bank statement containing our payment to Hernandez Ortiz will be sent to us by our bank, ABN. Therefore, we should chose OFFICE NET EXTRA as the appropriate import protocol.

The local currency (LCY) is defined in the General Ledger Setup page as described in the article Understanding the General Ledger and the Chart of Accounts. Once the local currency (LCY) has been defined, it will be represented as a blank currency, so when the Currency field is blank, it means that the currency is LCY.