Accounting Currency


DEFINITION of 'Accounting Currency'

The monetary unit used when recording transactions in a company's book. The accounting currency is not necessarily the same as the selling currency, which is what customers see when conducting a transaction, such as a sale. Companies are likely to use their home country's currency when recording transactions, even if the sale was denominated in a foreign currency. For example, a Chinese firm conducting business in Japan will likely use the yuan as the accounting currency, even if sales transactions are conducted using the yen.

BREAKING DOWN 'Accounting Currency'

For companies or investors managing multiple currencies, the interplay of foreign exchange rates and conversions can make the maintenance of the books a complicated task. For companies operating in countries with a major currency, such as the U.S. dollar, euro or pound, the accounting currency may be the same as the selling currency. Companies operating in smaller markets with "minor" currencies are more likely to have a domestic accounting currency and a foreign selling currency.

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  4. What does high working capital say about a company's financial prospects?

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