Foreign Exchange Transaction

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Nitesh Sethiya (Querist)
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02 September 2009 I have goven advance to supplier out of india of Rs. 71000$ on dated 20th MArch 2009. I have received the Maerial on 30th April 2009. I have to finalise my Balance Sheet on dated 31 March 2009. Then what we have to do on 31st march.

Tell me there is any need of giving difference of Foreign Exchange difference between date 2oth March and 31st March?

Pls suggest me full procedure that what I have to do in the books?

Shashikant Patil

Shashikant Patil (Expert)
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02 September 2009 In present case there is no need of showing exchange rate difference because advance is made on 20th march 2009 and material is received on 30th April 2009. When balance sheet is finalized on 31st March 2009 then this balance is lying in advance paid to party account. And material is received after balance sheet date.

So as on 31st March 2009 no need of any foregin exchange difference to be shown

Kaustuv

Kaustuv (Expert)
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04 September 2009 For the year ended 31 march 2009 there is no P/L hit. You would book purchase only on 30th April on receipt of material.This is a balance sheet item which would be converted using the closing rate. But in my mind there would be exchange difference for the period ended 31 March 2009 because of the possible difference in exchange between the date of the transaction and the balance sheet date. I invite your attention to Para 12 of AS-11 which states:-

An exchange difference results when there is a change in the
exchange rate between the transaction date and the date of settlement
of any monetary items arising from a foreign currency transaction.
When the transaction is settled within the same accounting period as
that in which it occurred, the entire exchange difference arises
in that period. However, when the transaction is not settled in
the same accounting period as that in which it occurred, the
exchange difference arises over more than one accounting period.

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