What is 'functional currency' in SAP AC - Accounting - General?

functional currency - Overview

• Component: AC

• Component Name: Accounting - General

• Description: The currency of an entity's primary economic environment. The functional currency should be the currency in which the business transactions are normally denominated. For example, if the company is headquartered in Germany, but trades mainly with goods from Japan that are invoiced in Japanese yen, the functional currency is yen. The functional currency of an entity can also be the company code currency or any other currency type that is used as an additional FI currency that is, a currency that is used in certain FI-related application components, such as Accounts Payable and Accounts Receivable as well as in Asset Accounting.

functional currency - Details

• 
  Key Concepts: 
  Functional currency is the currency used to record and report financial transactions in SAP. It is the currency of the country in which the company operates and is used to record all transactions in the general ledger. 
  
  How to use it: 
  In SAP, functional currency is set up in the company code configuration. This currency is then used to record all transactions in the general ledger. All transactions must be recorded in this currency, and any foreign currencies must be converted into the functional currency before being entered into the system. 
  
  Tips & Tricks: 
  When setting up a company code, it is important to ensure that the functional currency is set correctly. This will ensure that all transactions are recorded accurately and that any foreign currencies are converted correctly. 
  
  Related Information: 
  For more information on setting up a company code in SAP, please refer to the SAP help documentation. Additionally, for more information on functional currency and how it is used in SAP, please refer to the SAP documentation on AC Accounting - General Ledger Accounting.