What is Only Balances in Local Currency in SAP?

Only Balances in Local Currency is a setting in the GL master record that ensures balances are maintained only in the company code currency. When this option is selected, SAP converts all transactions into local currency and avoids posting exchange rate differences. This setting is typically used for balance sheet accounts such as GR/IR clearing accounts or cash discount clearing accounts, but it should not be used for AR and AP reconciliation accounts because those accounts usually contain transactions in multiple currencies.

 When this checkbox is active:

The system keeps the account balanced in company code currency.

Even if multiple currencies exist in line items.

Why?

Without it, clearing documents can produce foreign exchange differences.

Typical accounts using it:

Bank clearing accounts

GR/IR accounts

Cash clearing accounts

Because those accounts must always balance in local currency.

 Here is the content structured clearly for interview and study purposes.

Only Balances in Local Currency – SAP GL Account Setting

1. Definition

Only Balances in Local Currency is a setting in the G/L Account master record.

When this checkbox is selected, the system:

  • Maintains balances only in the company code local currency

  • Displays all transactions in local currency

  • Prevents exchange rate differences from being posted.

In simple terms:

All postings are managed in company code currency only.

2. Purpose of the Setting

The main purpose is to avoid foreign exchange differences when clearing transactions that may involve multiple currencies.

Example:

Company Code Currency = INR

Transactions may occur in:

  • USD

  • EUR

  • GBP

If Only Balances in Local Currency is active:

System stores balances only in INR

This avoids exchange rate difference postings.

3. How the System Works

When the option is selected:

ScenarioSystem Behavior
Multiple currencies postedSystem converts them to local currency
Balance displayOnly local currency
Exchange rate differenceNot posted

4. Where This Setting Is Used

This option is typically selected for Balance Sheet Accounts that do not require currency tracking.

Examples:

1️⃣ Cash Discount Clearing Accounts

Used during vendor payment discounts.

2️⃣ GR/IR Clearing Accounts

Used during procurement process.

Example:

Goods Receipt
Dr Inventory
Cr GR/IR Clearing

3️⃣ Balance Sheet Accounts without Open Item Management

5. Where It Should NOT Be Used

This checkbox should NOT be selected for reconciliation accounts.

Specifically:

❌ Accounts Payable Reconciliation Accounts

Vendor transactions may occur in multiple currencies.

Example:

Vendor Invoice
USD / EUR / INR

❌ Accounts Receivable Reconciliation Accounts

Customer invoices may be issued in different currencies.

If local currency only is selected, it will cause incorrect currency handling.

6. Example Scenario

Company Code Currency = INR

Vendor Invoice:

USD 1000
Exchange Rate = 80

System records:

INR 80,000

If exchange rate changes later:

  • Exchange difference will not be posted if local currency only is active.

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