Master in Accounts & high court Advocate
9615 Points
Posted on 07 October 2024
In a partnership firm, foreign travel expenses of a partner are considered a business expense and should be accounted for in the profit and loss account (PLA). Since the expense is less than ₹2 lakhs, it need not be reported in Form 3CD (Audit Report). However, the expense should be shown in the Balance Sheet as a deduction from the partner's capital account or shown as a separate expense in the Profit & Loss Account. Regarding currency details, you should maintain records of the foreign travel expenses in the original currency (e.g., USD, EUR, etc.) and convert them to INR (Indian Rupees) using the applicable exchange rate at the time of incurrence. In the Balance Sheet or Profit & Loss Account, you can show the expense in INR, with a footnote or disclosure indicating the original currency and exchange rate used for conversion.. Here's a summary: - Show foreign travel expenses (<₹2 lakhs) in the Profit & Loss Account or as a deduction from the partner's capital account in the Balance Sheet. - Maintain records in the original currency and convert to INR using the applicable exchange rate. - Disclose the original currency and exchange rate used for conversion in the financial statements.