Accounting entries

1. Bank A/c                         Dr.          81064.25*50.88 (Rate on Transaction date)

          To Loan from........

31/3/2012

2. Interest Exp A/c              Dr.        1045.73*(4.5/6)*50.87 + withholding tax

               To Prov for Int exp A/c                                         1045.73*(4.5/6)*50.87

               To prov for withholding Tax                                withholding tax

 (int exp recognized for the period at closing rate)

3. Loan from.....               Dr.        (50.88-50.87)*81064.25

         To Foreign Exchange Diff A/c   (transfer this a/c to P&L as profit)

(Since loan is a monetary item it will be marked at closing rate)

Thank u very much Pulkit Sir.

But you have taken entire interest cost i.e. for the period from 16.11.2011 to 15.05.2011 on 31st March 2012. In my views only interest for the period from 16.11.2011 to 31.03.2012 should be provided in the financial year 2011-12. Am I correct or Not???????????? plz  reply.

thanks & regards

dear kalika,

you are absolutely right. interest will be taken upto 31.2.12. at first you need to calculate interest in dollar terms and make a liability for the said amount by convertin the amount in the domestic currency with the available exchange rate on that date.

cheers

ganesh agarwala

Thanks a lot Mr. Ganesh

in the above calculations it is mentioned that total loan period is 6 months & 4.5 months is in F.Y 11-12,

i've writen 1045.73*(4.5/6)*50.87