30 August 2010
Hi. Kindly clarify my doubts. AS-11 recommends to transfer the exchange fluctuations on account of foreign transactions to profit and loss a/c.
My doubtas are as follow: Transferring exchange differences on unsettled monetary items say drs and crs on reporting date, to profit and loss a/c, 1. In case of gain, transferring to p&l results in recognisisng future income which is in contradiciton to prudence concept and i have to pay tax for unrealised income and if the rate falls at the time of settlement of debts, the tax paid earlier will be lost and i unnecessarily loose my working capital by paying unnecessary tax.
31 August 2010
You have to pay tax as per IT Act,1961 not as per ur books of accounts. As per AS 11 u hv to recognize the profit on monetary items in p&L A/c bcz monetary items are shown at there realizable value on the date of BS. For Ex.We value stoct at cost/NRV on the date of BS but next year it may be low or high in value. So monetary items are valued on there realisable value on closing date and for the you don't have to pay tax.
CAclubindia
