Exchange rate urgent ?

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uday singh Negi (Querist)
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09 November 2012 dear sir,

i have one query regarding booking of invoices

if suppose we received some invoices from overseas party

suppose

date amount (usd)

5.10.2012 ( 1000 usd )
8.10.2012 ( 2000 usd )

exchange rate on that day suppose rs. 50 & 51

and suppose i forgot to book all the invoices on time
and i booked on 2.11.2012 ( and suppose exchange rate was rs. 55/- on 2.11.2012)

so which exchange rate i used for conversion & why?
invoice booking date i.e ( 2.11.2012 ) or the same rate on which invoice raised ( i.e 5.10 & 8.10.2012 )

expert pls reply

thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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10 November 2012 The transaction will be recorded on the basis of exchange rate prevailed on the date of transaction as per AS-11.

uday singh Negi

uday singh Negi (Querist)
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11 November 2012 means which rate sir please clear me

thanks

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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21 July 2024 In accounting, especially when dealing with foreign currency transactions, the choice of exchange rate for booking invoices depends on the accounting policies followed by the organization. Here’s a general guideline on how to decide which exchange rate to use:

1. **Transaction Date vs. Invoice Booking Date:**
- **Transaction Date (Invoice Date):** Some organizations use the exchange rate prevailing on the date of the transaction or invoice date (5.10.2012 and 8.10.2012 in your case) for conversion purposes. This approach ties the accounting to the specific transaction date when the economic event occurred (i.e., when the goods were received or services were rendered).

- **Invoice Booking Date:** Others use the exchange rate on the date when the invoice is actually booked in the accounting records (2.11.2012 in your case). This approach reflects the financial impact of the transaction as per the accounting system's timing of recognition.

2. **Choice of Exchange Rate:**
- Generally Accepted Accounting Principles (GAAP) or specific accounting standards (like AS 11 in India) may guide on which exchange rate to use. It's important to adhere to these standards consistently.

- In many cases, the exchange rate on the transaction date (invoice date) is preferred for initial recognition in accounts payable or receivable. This rate ensures that the financial statements reflect the value of the transaction accurately at the time it occurred.

3. **Consistency and Documentation:**
- Whatever method you choose, consistency is key. Ensure that the same method is applied consistently across similar transactions.

- Document the rationale and method used for exchange rate conversion in your accounting policies or internal guidelines.

**In your specific scenario:**
- Since you forgot to book the invoices on time and booked them on 2.11.2012, you would typically use the exchange rate prevailing on the date of invoice booking (2.11.2012) for converting the USD amounts to INR. This rate would reflect the financial impact of the transaction as per the date of recognition in your accounting records.

- However, if your organization follows a policy of using the transaction date exchange rate (5.10.2012 and 8.10.2012), you might need to adjust accordingly or seek advice on whether late booking warrants a different approach.

**Consultation:**
- It’s recommended to consult with your accounting department, financial advisor, or auditor to ensure compliance with accounting standards and to determine the appropriate exchange rate method based on your organization’s policies and applicable regulations.

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