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Foreign accounting

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This query is : Resolved

Vimal (Querist)

18 September 2011 Kindly explain me the areas where there will be main impact of Exchange rates while making accounts for enterprise having export&imports..
for example if a company having business in Singapore buys from Europe and USA- Company will account in SGD(Singapore dollar but payments will be according to specific currency of the party..
So it will show difference in ledger because of exchange rate..
Kindly explain impact and advantage

mohamed ziaudeen

mohamed ziaudeen (Expert)

12 October 2011 At the time of purchase, Purchase entry is made at the rate prevailing on purchase date.If payment is made say, after 60 days the Exchange rate difference should be recognised in accounts. If exchange rate at the time of payment is favourable, then there will be exchange gain, If adverse, then exchange Loss should be booked.
On balance sheet date, the trade payable should be brought to closing rate and eachange difference has to be accounted
To avoid exchange losses, you can go for hedging.

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