Definition
A base currency is the currency in which a business keeps its ledger and produces its financial statements. Every transaction in another currency is converted into the base currency at an exchange rate, so trial balances, ledgers and statements add up in one unit even when invoices, bank accounts and loans use several currencies.
How it works
In IFRS terms the base currency is normally the functional currency: the currency of the primary economic environment the business operates in, the one that mainly drives its prices, costs and financing (IAS 21). A company may present its statements in another currency, the presentation currency, but its books are usually kept in the functional one.
Choose the base currency when you create the business and treat it as permanent. Changing it later means retranslating history. A trading company in Dubai that sells and pays staff in dirhams uses AED even if half its suppliers invoice in US dollars.
In Ledgeriano each business has its own base currency, so a group can run one company in euros and another in dirhams from the same account. Entries can be recorded in any active currency with the stored rate, and all reports show base-currency amounts.
Example: a USD invoice in a EUR-based company
A company whose base currency is EUR buys software for 1,000 USD when the rate is 1 USD = 0.92 EUR.
The journal line keeps the foreign amount for reference (1,000 USD) and posts 920 EUR to the expense and payable accounts. The trial balance, ledger and statements only ever add euros.