https://generalledger-gl.blogspot.com/2025/09/understanding-direct-and-indirect.html
Understanding Direct and Indirect Quotes
1. Domestic / Functional / Ledger Currency: This is the currency of the country or company’s books.
Example: If you are in the UAE, your domestic currency is AED.
Foreign → Domestic = Direct Quote
(How much local/domestic money for 1 unit of foreign currency)-
Domestic → Foreign = Indirect Quote
(How much foreign money for 1 unit of domestic currency)
Example with AED (domestic) and USD (foreign):
-
Direct:
1 USD = 3.67 AED -
Indirect:
1 AED = 0.272 USD
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2. Direct Quote
👉 How many units of domestic currency are needed for 1 unit of foreign currency?
• Formula: 1 Foreign = ? Domestic
• Example (in UAE):
1 USD = 3.67 AED
• Here, USD is the base (foreign) and AED is the quote/reference (domestic).
• ✅ Domestic price of one unit of foreign currency.
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3. Indirect Quote
👉 How many units of foreign currency can 1 unit of domestic currency buy?
• Formula: 1 Domestic = ? Foreign
• Example (in UAE):
1 AED = 0.272 USD
• Here, AED is the base (domestic) and USD is the quote/reference (foreign).
• ✅ Foreign price of one unit of domestic currency.
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🔑 Key Notes
• Base currency: always the “1” in the expression.
• Quote/Reference currency: the other one, expressed in relation to the base.
• Which quote (direct/indirect) is “standard” depends on the country and market.
