Foreign currency fluctuation treatment

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mukesh (Querist)
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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

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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23 November 2011 $150 will be treated as bank charges(if you are certain that the bank has deducted the same as bank charges)

mukesh

mukesh (Querist)
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23 November 2011 while i c the bank statement it is not show as bank charges just credited $ 1850 in my branch account.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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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.

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