Foreign Exchange Loss

AS 839 views 4 replies

Sudalaimuthu.R

Articleship trainee

45 Points Joined February 2009

Dear Friends

The below mentioned transaction is extracted from an internal audit report. Please give your valuable opinion as per AS 11. Whether Exchange fluctuation will come when advance money received?

In one transaction Exchange fluctuation amount wrongly debited to the amount of Rs.7,377/- instead of Rs.5,314/- i.e. Advance received from the customer for $ 11809 @ Rs.49.86 amounting to Rs.5,88,797/- against Invoice value of $ 11850 @ Rs.50.31 amounting to Rs.5,96,173/-. The Loss on Exchange fluctuation is Rs.5314/- only. The necessary adjustment to be done for this transaction. The details is given below:

Particulars	In USD ($)	Exchange Rate	Amount in Rs.	Remarks
Sales Invoice Amount	11850	50.31	5,96,173
Advance received from the Party	11809	49.86	5,88,797
Loss on Exchange Fluctuation	11809	.45 (50.31-49.86)	5,314
Amount charged as Exchange fluctuation in books			7,377
Discount on Sale	41 (11850-11809)	50.31	2063	To be accounted as discount on sales in Books

Replies (4)

CA munjal

articled clerk

100 Points Joined March 2009

The facts of the case shows that there are still 41$ remaining to be recovered from Debtors. As per AS 11 monetary asset denominated in foreign currency should be translated using the rate applicable on balance sheet date and accordingly in addition to above loss, loss of 41 * (rate on bs date - 50.31) should also be appropriately booked.

CA munjal

articled clerk

100 Points Joined March 2009

If however the 41$ is not recoverable then

41* (rate on which it was determined to give discount - 50.31) should be booked as foreign exchange loss/gain and remaining amount should be charged as discount.