Keen to learn something new every moment
2588 Points
Joined June 2010
Para 46 and 46A was has came out to mitigate the dificluties faced by the multi national companied in making foreign currency loan and their accounting. Bcs of foreign currency fluctuation it results in exchange loss which is play a vital role when it accounted through Profit and Loss account. Hence for removing the difficulties Optinal Scheme was bring out by the MCA...by this circular companies are able to deffer the currencey exchaneg loss in one or more periods so their profit and loss remian unaffected.... When exchange loss arise the companies earlier to this circular making following entries....
P& L A/c .............Dr.
To Foreign exchange Difference A/c
After the circular company have option either to show the same as above or may follow
as below
Foreign currency Monetary Item Translation Difference A/c------(Dr or Cr..as case may be)
To Foreign exchange loss A/c (Dr or Cr.)
Foreign currency Monetary Item Translation Difference(FCMITD) A/c shall be shown as Assets or Libility as case may be...and it shall be written off year to year on systematic basis...as directed by MCA.