ForeignCurrency Reinstatement

 

Normally reinstatement is done in the year end. We take the balance appearing in the books of accounts & convert it as on 31st March rate (Assuming 31.3.20008). Compare the balance appearing in the books. Difference we take it to Fluctuation a/c (Debit or credit as the case may be). & the party a/c (debit or credit as the case may be).
This reinstatement entry will be passed on 31.03.2008. The same entry will get reversed on 01.04.2008.
Again reinstatement will be done for the balance appearing as on 31.03.2009 with rate appearing as on that date (31.03.2009). Am I Correct? Please let me know.
Replies (4)

You are right, but we don't do the reversals in the next month say april, becuase once you do the next year/ next quarter/ next monht restatement it gets adjusted automatically, right. So its not required to reverse, the entry.

Thanks madam for the reply.

But I am not able to understand the second part of your reply. If the reversal is not done, how will the party account reflect?

Should I do the revesal or not?

If I Should pass the reversal when should I do that?

say for example, you receive $ 1000 in the current month @ rs.47 / 1$. in the end of the month say, the dollar rate is rs.48 / 1$. you get re.1 per dollar, ie rs.1000/- gain overall. now you are putting an entry for the same. next month say you are receiving $ 1000 @ 47.5. now your total in party account in dollar is $ 2000 in rupees it is 48000+47500 = rs.95500/-. now say at the end of next month dollar rate is 48.5. Now  you are restating @ 48.5 your total amount $ 2000, it comes to rs.97000/- now you are accounting the gain. so what is the need of reversal?. now as on end of the month say today, your dollar account shows the balance at the prevailing rate of exchange.

 

 

if you couldn't understand, please call me in 09901965627 (bangalore)

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