Our company's person went to abroad country for business work for the period
25/10/24 To 31/10/24.
He incurred foreign expensesed 2000 US
from his own pocket ( He not get advance for tour )
We get reference of foreign exchange rate on currency rate website for the date of 31/10/24 & exchange usd in to INR
& give INR to our person.
Here we are not given advance, so we can not create foreign exchange gain / loss.
Is it this method correct or is it necessary to account for foreign exchange gain / loss
Pl guide
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Gain and Loss
Replies (3)
Quick Summary
In this case, yes, you should account for foreign exchange gain/loss.
Here's why:
1. The employee incurred expenses in USD, and you reimbursed them in INR.
2. There's a time difference between the expense date (25/10/24) and the reimbursement date (31/10/24).
3. Exchange rates may have fluctuated during this period.
To account for foreign exchange gain/loss:
1. Record the expense in USD (2000) on the date it was incurred (25/10/24).
2. Use the exchange rate on that date to convert USD to INR (initial exchange rate).
3. Record the reimbursement in INR on the date it was made (31/10/24).
4. Use the exchange rate on that date to convert USD to INR (reimbursement exchange rate).
5. Calculate the difference between the initial exchange rate and the reimbursement exchange rate. This will give you the foreign exchange gain/loss.
6. Record the foreign exchange gain/loss in your accounts.
Thanks for guidance. Is recording foreign exchange gain loss is mandatory as per IT Act, or it is mandatory to follows Indian Accounting standard.
A separate statement us required to be prepared
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