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Foreign exchange loss.

Vikash Kumar (Manager Accounts (CA. Final)) (694 Points)

10 September 2011

A company import goods from US against 50% advance payment & remaing after 30 days of import. At the time of advance remittance USD rate was Rs.45, on the day of bill of entry it was Rs.45.50 & at the time of balance remittance it was Rs.46. Please suggest me regarding booking of foreign exchange loss & proper reason therof.

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7 Replies

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 10 September 2011

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.

3 Like

Vikash Kumar (Manager Accounts (CA. Final)) (694 Points)
Replied 10 September 2011

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

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 10 September 2011

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)

1 Like

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 10 September 2011

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

Vikash Kumar (Manager Accounts (CA. Final)) (694 Points)
Replied 10 September 2011

Thanks for quick reply.

Prakash (Chartered Accountant) (560 Points)
Replied 10 September 2011

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

1 Like

CA Sachin Rastogi (Audit/IFRS Manager) (338 Points)
Replied 12 September 2011

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.