One question I see a lot has to do with how multicurrency works in odoo.

I've decided to make an overall post going over how odoo accounting works conceptually and the questions you should ask when using the software to correctly record the transactions. 

I believe its best to illustrate how odoo multicurrency works with a scenario to see how the system all flows together.

So to start all entries are created in the base currency. So lets say I start a company with the US localization. My companies currency will be in USD so all my journal entries will be usd. 

In that company I have a bank account with a European bank in euros. Whenever I make a journal entry (via, bill, invoice, or bank statement) in the second currency it will look at the value in my base currency on that date or the closest one before and post that amount in my base currency to the entry.

I​t will also hold a amount in foreign currency balance. This can be seen by clicking the three dots to see more fields. It will have one called amount in currency and currency. If you create a bill in a foreign currency these fields are set by the bill being in the foreign currency. 

-------------------------------------------------------------------------

So Lets say its the start of the year and the rate for USD to Euro was 1:2 and this is the rate we issued a invoice for 10 euros at. It will post revenue at the 5 USD and Receivable at 5 usd. The amount in foreign currency on the receivable is 10 Euros. 

A few weeks later the payment comes in for 10 Euros but the rate has changed to 1:1. So the entry on accounts receivable is 10 leaving a balance that was caused by the changing rates. This is then viewed as the amount of money you lost in your base currency waiting to be paid or pay. In this case it would be a loss as your base is USD and it lost value in comparison to the euro. 

So this loss or gain is handled automatically in odoo when you reconcile the invoice against the payment or bank statement line. The reconciliation must be fully complete on both sides for the entry to be created. By that i mean if a supplier paid 100 euros in advance to me. I reconcile the payment against 1 invoice for 50 euros. It will not create the adjusting entry till the full amount in foreign currency is reconciled. So if I reconciled another 50 Euro invoice against the payment then it will create the exchange entry. If I reconciled a 51 Euro invoice against it the entry wouldn't be created either. 

But once there is a full reconciliation odoo will take the total of the amount in your base currency for the invoices/bill and add them up then it will take the amount of the payment in your base currency. The difference in this has to be caused by the changes in the exchange rates so one entry is created to adjust for all of the differences. 

Now to one of the most common mistakes I see. There are two questions you need to answer when creating and reconciling payments in foreign currencies. What currency did the customer pay in and what currency did you receive in. 

The payment should always be in the currency the customer paid in to match the invoice to the customer. This ensures you create the full reconciliation and automatic entry described above as well from a transactional standpoint ensures you are recording in what currency did the client pay. 

If a client in my example paid me in euros and it goes to my euro bank account this will match up and reconcile. Any difference caused by date will be accounted for based on the payment. 

The issue comes from when the bank does the rate exchange for you in a payment from a customer who was invoiced a foreign currency. So your customer paid you 100 euros but it went to your US bank account at a rate that is different then odoo has for the day. Some people try to create the payment for the currency they received. This is incorrect and will lead to issues reconciling the payment to the invoice since the amount base will be different it will leave a value open on the invoice/payment as no adjusting entry is created. 

If you don't set the amount in foreign currency on the bank statement line as the rate for your base currency, when reconciling against the payment in foreign currency, it will take the amount in your currency and convert it based on the rate you have set in odoo. If you set this amount you are overiding the rate in odoo saying this line is worth this amount cause it needs to reconcile with this invoice. Then the gain or loss on the payment will be made on this amount difference from when it was booked on the invoice. 

So the question to ask when inputting the payments/invoice is what did the customer pay and what did I receive. If these are different you need to create the payment in what the customer paid and set the amount in foreign currency on the bank statement line.

----------------------------------------------------------------

So now the other topic everyone should know about with multicurrency unrealized gains or losses.

In our example when looking at my financial reports for any day after the journal entry in a foreign currency, whether that be a bill, invoice, or bank statement in a foreign currency bank account, the amount will be incorrect in the sense that its showing me the value in base currency but both my bank accounts and any open bills or invoices still are valued at the rate they were input at.

So this is where the unrealized gain or loss report and adjustment come in. From this report you set the date on the calendar and create an adjustment. It will look at any bills/invoices that are not fully reconciled. It will then look at the sum of this and the sum of what they should be valued at today date and takes the difference. This difference is then used to create the adjusting amount. It will show as a gain or loss for the date you set then reverse itself the next day as these gains or losses will be realized evenutally

Now when you create the unrealized gain or loss adjustment it will also look at any bank accounts in foreign currencies. It will look at every line in that bank and see what rate it was posted at compared to the rate of your adjustment and add this to the difference. As when we revalue every line in the bank account we ensure the balance in foreign currency is correctly valued at the unrealized rate in our financial reports.

We revalue the bank accounts conceptually cause you are doing nothing but the value of your account does change over time as the rates change.

————————————————————————————————-

So now that I have gone through everything I am going to summarize the main things you need to worry about if your rates are set correctly.

Ask yourself what currency what did the customer pay and what did I receive. The answer to this question will determine if you need to use the amount in foreign currency on the bank statement line to reconcile. Because of this the payment and invoice should be in the same currency and odoo will handle the gains or losses for you automatically. There is no need to do the math manually on transactions. Other then that as long as you revalue your currencies odoo reports will be correct and adjusted for this on dates you make the adjustment.