Journal Entry on Foreign currency payment

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This query is : Resolved

Vijay Kumar (Querist)

13 February 2026 I paid 80,000 Euro at exchange rate of Euro to INR 107.59 total INR debit from bank was 8607200 and USD to INR exchange rate is INR90.72, now accounting/reporting currency is USD. please prepare the journal entries how to pass in my books of account in USD

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

14 February 2026 1. If Payment is for Expense
Dr Expense / Asset A/c USD 94,880.99
Cr Bank A/c (USD) USD 94,880.99
2. If Payment is Against Existing Payable
Example:

Suppose payable recorded earlier at USD 92,000

Now payment made USD 94,880.99

Difference = 2,880.99 (Forex Loss)

Entry:
Dr Accounts Payable USD 92,000
Dr Forex Loss USD 2,880.99
Cr Bank USD 94,880.99

Since reporting currency is USD:
All transactions must be translated at spot rate on transaction date.
Bank (INR) must be translated to USD equivalent.
Any exchange difference goes to P&L.

If Bank Account is Maintained in INR Ledger

Then in books:

You will maintain:

INR Bank (in USD books)

Record USD equivalent.

At period end, revalue INR bank balance at closing USD/INR rate and recognise forex gain/loss.

Final Journal Entry (Standard Case)
If fresh payment and no prior payable:
Dr Expense / Asset A/c 94,880.99 USD
Cr Bank A/c 94,880.99 USD
(Being 80,000 EUR paid, converted via INR to USD at applicable rates)

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