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Forex treatment

Biswas Ardhendu Sekhar (PRACTISING CA) (67 Points)

04 July 2011

On 01.01.2011 A Private Company purchased $1,000 @ 48 per $ for Travelling Expenses Abroad of its Director.

The Director incurred $920 in course of his travell and on return on 29th March 2011 returned $ 80 (the unspent $).

The $ was retained on 31st March 2011 when the exchange rate was $1 =43.5. The $ was deposited in the Company's Bank Account on 7th April @ 46 per $. Please show the accounting entries on the date of actual transactions and how the Forex Balance in hand will be shown in Balance Sheet and at what value.

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6 Replies

Devendra (Chartered Accountant) (4780 Points)
Replied 04 July 2011

Respected Sir,

Following will be the Entries in the above mentioned case:-

Voucher Type : Bank Payment

Travelling Exps A/c Dr 48000

To Bank A/c 48000

( Being $1000 purchased @ Rs. 48/$ )

Voucher Type : Journal

Cash A/c (Foreign Currency) Dr. 4380

(Grouped under Current Assets)

To Travelling Exps 4380

( Being the remaing balance credited to

travelling Exps A/c [80*43.25] )

Therefore, as on 31st March the value of Foreign Dollars in han in the Balance Sheet will be Rs. 4380.

Please correct me if I am wrong.

Regards,

Devendra K

1 Like

V P Narasimhan (Accounts Manager) (793 Points)
Replied 04 July 2011

It's better to clasify the a/c as Travel Overseas A/c to distinguish from Local Travel Expenses.

The Exchange gain/Loss/ Charges also can be booked under the above heading.

It will be useful to derive the "Expenditure in Foreign Currency" statement when it has to be declared in Notes of Account.

1 Like

valji (Accounts manager-MBA) (2150 Points)
Replied 04 July 2011

Agree with mr V.p. narasimhan disti between local & travelling overseas so it become easy to find out expenditure in foreign curreancy

Cash in dollar dr 1000$

To creditor for A (party from Whom purchase ) 1000$

Director A/c Dr 1000$

To cash In dollar 1000$

After Travel complete

Travelling exp Dr 920$

Cash In hand $ 80$

To Director 1000$

the exchange gain/loss will taken at the rate at which dollar purchased & spent during travelling transfer to cash in dollar a/c

at 31st amrch for exmple if rate is 43.35 at purchased rate 48

then

Unrealised exchange /loss dr 360(48-43.5*80)T

To cash in had $ 360

if you see

your account shows 80*43.5=3480 in cash in dollar a/c

1 Like

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graph) (85935 Points)
Replied 04 July 2011

Originally posted by : V P Narasimhan
	It's better to clasify the a/c as Travel Overseas A/c to distinguish from Local Travel Expenses. The Exchange gain/Loss/ Charges also can be booked under the above heading. It will be useful to derive the "Expenditure in Foreign Currency" statement when it has to be declared in Notes of Account.