Purchase date and value in case of import (trading)

Accounting Entries 2732 views 3 replies

Prateek

Top Management

213 Points Posted on 20 November 2013

We import prodcuts for trading purpose on CNF basis. Supplier raises Invocie in USD the date on which Bill Of lading is provided by shipping line.

Our payments are 20% advance agaisnt PI and Balance on reciept of documents.

Question:

What date should be taken as the pruchase date ?

Date of Invocie
Date when I receive the Copy/Original Invoice
Date on which final / balance 80% payment is made
Date when vessel reaches Port
Date of Bill of Entry is passed by customs

Which exchange rate to use for the conversion ?

Actual rate at time of payments
RBI referecne rate as on date of purchase
Customs reference rate on date of pruchase

In case the USD rate from Q2 is 2 or 3, then how / under which ledger to account for the difference in purchase cost and actual amount remitted.

Replies (3)

Paarth

Finance Associate

210 Points Posted on 20 November 2013

Hi Ashish

As per provisions of accounting, a product is deemed to be the property of transferee(buyer) when both possession and payment for the same has been made to transferer(seller). In your case the date on which balance payment is made should be taken as record date for Purchase of goods. As you have recieved the possession but the adequate consideration is made only after the product is there in INDIA, thats with customs.

The exchange rate should be considered the rate on Date of Purchase. The diff should be recorded as 'Difference in Exchange Rate' which may be debit if rate increased or credit if rate decreased.

Prateek

Top Management

213 Points Posted on 20 November 2013

Please clarify : "In your case the date on which balance payment is made should be taken as record date for Purchase of goods. As you have recieved the possession but the adequate consideration is made only after the product is there in INDIA, thats with customs. "

Full payment is made against documents i.e. before the goods reach the Indian border.

"The exchange rate should be considered the rate on Date of Purchase." - Which rate, the rate at which we remit or RBI rate or customs rate ?