Material in transit

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This query is : Resolved

Deepak vishwakarma (Querist)

05 February 2018 One of my client engaged in Export of Goods and import of goods.During the year ended company has purchases a goods from America and it was in transit. so company has recorded it as "Material in Transit" on 31/03/2017 at on prevailing exchange rate of Rs.50/$.
the entry has been made as followed by the company

Material in Transit A/c Dr. Material Value*50
To Party Material Value*50

On 15.04.2017 the company has received goods. and on that date foreign exchange rate prevailing Rs. 55.
The Company again recorded the goods as follows:

Purchases A/c dr. Material Value*55
To Party Material Value*55

and after receiving of Goods the company has reverse the Entry which was posted on year 31.03.2017
The reversal entry was as followed:

Party Ac/ Dr. Material Value* 50
To MIT Material Value*50

Whether this treatment is correct or wrong?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 February 2018 This treatment is right.

Deepak vishwakarma

Deepak vishwakarma (Querist)

07 February 2018 Dear Sir

If we posted purchases @ 55, it means that we clubbing the Exchange difference (55-50)=5 in current year.
Its my opinion the purchases should be posted @ 50 and difference should be posted as foreign exchange if payment made to party. Because we already posted MIT in preceeding year.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

08 February 2018 As per AS 11,
(b) income and expense items of the non-integral foreign
operation should be translated at exchange rates at the dates
of the transactions;
So exchange rate as on the transaction date to be considered.

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