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Export Sales accounting - Date & Rate of exchange

Sunil Nayak (Chartered Accountants) (96 Points)

23 June 2008

Hi Friends

When the sales which are exported shall be accounted and rate of exchange of which date should be taken for accounting purpose?

To illustrate, the sales invoice is raised on 10-06-08 in USD on US customer. The documents are verified by custom authorities and Bill of Ladding is prepared on 13-06-2008. The goods are actually despatched from the Mumbai custom port to US on 14-06-08.

Now my questions are below:

1. On which date the Sales entry should be passed in the books of account?

2. Which date's rate of exchange should be taken for ascertaining the INR value? Is it the exchange rate on Invoice date (10-06-08) OR is it the exchange rate on the date of Bill of Ladding (13-06-08) ?

Please clarify and provide the rationale for the same.

Regards

Sunil Nayak.

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20 Replies

Hema Desai (PRACTICING CA AND ENTERPRENEUR) (92 Points)
Replied 23 June 2008

Hi Sunil

In my opinion 10th June

As sale transaction is complete as on that date, clearing from customs is legal formality subsequent to date of sale

Kindly let me know if anybody is of different opinion

Hema Desai

FCA, DISA

rajesh (Manager - Accounts & Commercial) (57 Points)
Replied 24 June 2008

Normally export sales considered on Let export date in Exchange Control copy of shipping bill

1 Like

Sanjay Govil (Student) (111 Points)
Replied 24 June 2008

Further to add to question posed by Mr. Sunil, which exchange rate should be used? The rate notified for the particular month by the customs authorities or the TT Buying Rate of our Bank as on the particular date? Regards Sanjay Govil

Hema Desai (PRACTICING CA AND ENTERPRENEUR) (92 Points)
Replied 24 June 2008

TT Buying Rate as on that dat

manoj (acct) (26 Points)
Replied 26 September 2008

Originally posted by :Sunil Nayak
"	Hi FriendsWhen the sales which are exported shall be accounted and rate of exchange of which date should be taken for accounting purpose?To illustrate, the sales invoice is raised on 10-06-08 in USD on US customer. The documents are verified by custom authorities and Bill of Ladding is prepared on 13-06-2008. The goods are actually despatched from the Mumbai custom port to US on 14-06-08. Now my questions are below:1. On which date the Sales entry should be passed in the books of account?2. Which date's rate of exchange should be taken for ascertaining the INR value? Is it the exchange rate on Invoice date (10-06-08) OR is it the exchange rate on the date of Bill of Ladding (13-06-08) ?Please clarify and provide the rationale for the same.RegardsSunil Nayak.	"

as per my opinion the treatment for Export Sales shall be as under-

1) Sales entry will be booked on Let Export Date (also called as LEO date) mentioned in Shipping Bill issued by Customs.

2) Exchange rate for calculation of sale value will be considered as per RBI Reference Rate (available on RBI site) as on LEO date.

3) actual payment may received before or after the shipment.

4) the difference between actual remittence and sale value will be booked as exchange flactuation gain/loss.

if there is any mistake please state.

dheeraj soni (CA) (43 Points)
Replied 20 August 2009

Hi sunil

In case of export sale the date of entry for sale would be the bill of lading or excahge control copy date which ever is letter. because until all the formalites of custom department are completed you can not treat it sale it may be return to you. and exchange rate would also be use for the same date

1 Like

Pankaj Gandhi Jaiswal (Chartered Accountant) (2629 Points)
Replied 11 November 2009

Hi sunil i am agree with dhiraj soni.....date will be that when no uncertanity involved and all risk & reward transferred

So In case of export sale the date of entry for sale would be the bill of lading or excahge control copy date which ever is letter. because until all the formalites of custom department are completed you can not treat it sale it may be return to you. and exchange rate would also be use for the same date

3 Like

kashyap (accountant) (22 Points)
Replied 02 March 2010

as per ACCONTING STANDARD what date to be considered as SALE ENTRY DATE for export company if the deal is fob or cfr?

Please inform by email on kashyap.thakkar @ yahoo.com

thanks,

CA RAJ KAPOOR SHARMA (Chief Manager (Accounts) at Vardhman Polytex Ltd.(unit-Vinayak Textile Mills) Ludhiana) (28 Points)
Replied 08 June 2011

In Case of Export Sales treatment in accounts, the following are the relevant sources:-

When the entry is to be done in books:-

Revenue Recognition: Accounting Standard 9

“Revenue from the sale of goods shall be recognised when all the following conditions have been satisfied:-

The entity has transferred to the buyer the significant risks and rewards of ownership of the goods…..”

At what rate the sale is to be booked:-

Changes in Foreign Exchange rates – Accounting Standard 11

“21. A foreign currency transaction shall be recorded on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between functional currency and the foreign currency at the date of transaction”

Summary:

Export sales to be recorded on the date of Shipped on Board mentioned on the Bill of Lading.
The exchange rate, prevailing on the date of Shipped on Board to be used for conversion of amount into INR.

1 Like

prakash (trainig under charered account) (67 Points)
Replied 14 March 2012

what should be rate in case of service provider

CA,CS Mehul Bhanawat (Job) (204 Points)
Replied 25 June 2012

1.Export sales to be recognised as on date printed on Bill of lading as shiped on board date, please remember that dont use the date of issue of bill of lading.

2. some times goods transfer from dry port than sales to be recognised when SOb date printed on shhiping bill of export issued when goods loaded on dry port. as risk and reward tranfer on dry port itself.

3 Rate of exchange taken as notified by custom authority on avg monthly basis. or RBI rate may be taken its accountig policy of concern.

as provided in AS 11 para 10. For practical reasons, a rate that approximates the actual rate at the
date of the transaction is often used, for example, an average rate for a
week or a month might be used for all transactions in each foreign currency
occurring during that period. However, if exchange rates fluctuate
significantly, the use of the average rate for a period is unreliable.

work is worship (Service) (2728 Points)
Replied 25 June 2012

Technically an Invoice should be raised on date when goods are loaded on the vessel for sailing

As the Bill of lading will normally have teh sailing date..

So payment becmes accrued on the date it is confirmed the goods are on vessel and export is taking place.

THe currency to be taken that prevailing on the date invoice is raised.

CA Karan Lodhi (CA and B.com(hons.)) (879 Points)
Replied 27 June 2012

You have to book sales on 10th june when you raised the bill on your customer using that day's exchange rate( i.e prevailing rate on 10th june) but you should journalise the entry for proceeds on the date of actual receipt of proceeds (using prevailing rate on that day's exchange rate). difference should be exchange fluctuation loss or gain.

PURUSHOTHAMAN (ACCOUNTANAT) (30 Points)
Replied 03 July 2012

Hello Professionals

I have one doubt we already received full payment from Customer (Buyer in China) and delivery the goods on after receiving payments but that goods not cleared in customs

What is treatment in booking sales entry and adjustment in payment received.

Thanks in advance

With Regards

T.Purushothaman