Foreign exchange loss.

Assuming the dollar amount to be 10000$

1) at the ime of advance:

Supplier A/c Dr.                 5000X45

              To Bank A/c                           5000X45

2) At the time of import:

Purchases A/c Dr.            10000X45.50

              To Supplier A/c                     10000X45.50

3) At the time of balance payment: 

Supplier A/c    Dr.              5000X46

               To Bank A/c                           5000X46

4) Booking of Exchange Diiff:

   Gain=5000X(45.5-45)

   Loss=5000X(46-45.5)

Net loss/gain==Nil

So, no entry for exchange diff.

@ Sumitji, We consider  foreign exchange loss/gain on each event(transaction) basis or net result basis?

Alternatively, you can pass the following two separate entries for exchange diff, but effect on P&L will be nil

1)  Exchange loss A/c Dr.      5000X(46-45.50)

                     To supplier A/c                               5000X(46-45.50)

2)Supplier A/c Dr.                        5000X(45.50-45)

                  To Exchange gain A/c                      5000X(45.50-45)

Originally posted by : CA Sumit Grover
	Alternatively, you can pass the following two separate entries for exchange diff, but effect on P&L will be nil 1)  Exchange loss A/c Dr.      5000X(46-45.50)                      To supplier A/c                               5000X(46-45.50)   2)Supplier A/c Dr.                        5000X(45.50-45)                   To Exchange gain A/c                      5000X(45.50-45)

agreed 

Thanks for quick reply.

As per AS-11, we have to present Exchange loss on each settlement date, Not on net basis

You have to record Exchange loss at the time of Bill of entry and at final settlement date

Agreed to Prakash that exchange loss/ gain are recorded on settlement dates and not on net basis. This will impact only when there is a reporting date before the settlement date. However, when the transaction is originated and settled in the same period then such transaction will  generate nil exchange loss/ gain.