Foreign currency fluctuation treatment
This query is : Resolved
23 November 2011
How i can treat the folowing expenses?
say example,
Suppose i remit $ 2000 (45/$)in my Combodia Branch for expenses and the same amount is credited in combodia branch $ 1850, means Bank deducted charge $150.
My ques is that How i will treat $ 150?
--as bank charges
or
--Adjusted with exchange rate?
like $2000 @ 45= Rs 90000
or Rs 9000/1850= @48.6486
say example,
Suppose i remit $ 2000 (45/$)in my Combodia Branch for expenses and the same amount is credited in combodia branch $ 1850, means Bank deducted charge $150.
My ques is that How i will treat $ 150?
--as bank charges
or
--Adjusted with exchange rate?
like $2000 @ 45= Rs 90000
or Rs 9000/1850= @48.6486
23 November 2011
$150 will be treated as bank charges(if you are certain that the bank has deducted the same as bank charges)
23 November 2011
while i c the bank statement it is not show as bank charges just credited $ 1850 in my branch account.
25 July 2024
In accounting, the treatment of foreign currency fluctuation and bank charges depends on how these transactions are recorded and reported. Let's break down the scenario you've described:
### Scenario:
1. **Remittance Details:**
- You remitted $2000 to your Cambodia branch for expenses.
- The exchange rate was $1 = Rs. 45, so you initially debited Rs. 90,000 from your Indian account.
2. **Credited Amount:**
- The amount credited in your Cambodia branch account was $1850.
- This implies that after deducting bank charges or due to exchange rate fluctuations, you received $1850 instead of the expected $2000.
3. **Bank Charges:**
- You mentioned that the bank deducted $150. However, this deduction doesn't show as bank charges on your bank statement.
### Treatment Options:
Based on the information provided, here’s how you could treat the $150:
1. **As Bank Charges:**
- If you know that the bank deducted $150 as charges (even though it doesn’t explicitly show on the bank statement), you should treat this amount as bank charges.
- This means you would record:
- Debit: Expenses (Bank Charges) Account - $150
- Credit: Bank Account - $150
2. **Adjustment for Exchange Rate Fluctuation:**
- If the $150 deduction is not clearly identified as bank charges but rather reflects a difference due to exchange rate fluctuation or any other reason, then you may need to adjust your accounting entries accordingly.
- For example, if the actual exchange rate received was different than expected, resulting in a $150 shortfall, you might adjust this in your books to reflect the actual amount received.
- However, it's crucial to have clarity on whether this $150 is indeed a charge or a result of fluctuation.
### Practical Approach:
- **Review Documentation:** Ensure you review all documentation related to the remittance, including communication with the bank or any other relevant documents that clarify the $150 deduction.
- **Consult with Bank:** Sometimes, banks may not explicitly state charges on the statement but include them in the exchange rate. Verify with your bank how they treat such deductions.
- **Accounting Entries:** Based on the clarification:
- If confirmed as bank charges, treat $150 as an expense.
- If due to exchange rate fluctuation, adjust the amount received accordingly in your records.
### Conclusion:
The exact treatment of the $150 would depend on whether it is identified clearly as bank charges or as a fluctuation due to exchange rates. Ensure you maintain accurate records and consult with your financial advisor or accountant to ensure compliance with accounting standards and regulations applicable in your jurisdiction.
### Scenario:
1. **Remittance Details:**
- You remitted $2000 to your Cambodia branch for expenses.
- The exchange rate was $1 = Rs. 45, so you initially debited Rs. 90,000 from your Indian account.
2. **Credited Amount:**
- The amount credited in your Cambodia branch account was $1850.
- This implies that after deducting bank charges or due to exchange rate fluctuations, you received $1850 instead of the expected $2000.
3. **Bank Charges:**
- You mentioned that the bank deducted $150. However, this deduction doesn't show as bank charges on your bank statement.
### Treatment Options:
Based on the information provided, here’s how you could treat the $150:
1. **As Bank Charges:**
- If you know that the bank deducted $150 as charges (even though it doesn’t explicitly show on the bank statement), you should treat this amount as bank charges.
- This means you would record:
- Debit: Expenses (Bank Charges) Account - $150
- Credit: Bank Account - $150
2. **Adjustment for Exchange Rate Fluctuation:**
- If the $150 deduction is not clearly identified as bank charges but rather reflects a difference due to exchange rate fluctuation or any other reason, then you may need to adjust your accounting entries accordingly.
- For example, if the actual exchange rate received was different than expected, resulting in a $150 shortfall, you might adjust this in your books to reflect the actual amount received.
- However, it's crucial to have clarity on whether this $150 is indeed a charge or a result of fluctuation.
### Practical Approach:
- **Review Documentation:** Ensure you review all documentation related to the remittance, including communication with the bank or any other relevant documents that clarify the $150 deduction.
- **Consult with Bank:** Sometimes, banks may not explicitly state charges on the statement but include them in the exchange rate. Verify with your bank how they treat such deductions.
- **Accounting Entries:** Based on the clarification:
- If confirmed as bank charges, treat $150 as an expense.
- If due to exchange rate fluctuation, adjust the amount received accordingly in your records.
### Conclusion:
The exact treatment of the $150 would depend on whether it is identified clearly as bank charges or as a fluctuation due to exchange rates. Ensure you maintain accurate records and consult with your financial advisor or accountant to ensure compliance with accounting standards and regulations applicable in your jurisdiction.
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