Query in Accounting Treatment of Import Purchases

When does the liability arise in respect of import of goods ? In case of goods delivered prior to the settlement of rates between the parties in agreement, then which rate shall be taken as the Purchase rate ?

In case of difference will it be treated as Exchange Rate Difference or Purchare Rate Difference.. ??

What is the provisional Entry & actual Entry ?

For Example:

on 1st apr X ltd purchsed goods worth $100 from Y ltd (exchange rate = Rs. 45 per $) on understanding with y ltd that ACTUAL PURCHASE PRICE will be fixed at a later date

on 2nd april X ltd sells those goods to Z ltd for $110 (exchange rate = Rs. 44.75)

on 3rd april Y ltd fixes purchase price as $102.5 (exchange rate = Rs. 44.80)

what entries will be posted for the above transactions??.

Entry is passed in the books only when the right of the property is passed to you. That is on dilivery. For the determination of foriegn exchange rate see the date of bill of entry. The date of bill of entry will form the basis for determining the rate.

Purchase / Import a/c Dr

To creditors a/c

On Payment the difference due to fluctuation of exchange will have to be accounted through P&L a/c as per AS -11

Creditors a/c Dr.

Loss on Foriegn exchange fluctuation a/c Dr.

To Gain on Foriegn exchange fluctuation a/c

To Bank a/c

If the bill is outstanding then the difference between the booked rate and 31st March rate has to be provided for through P&L. a/c.

Creditos a/c Dr.

To Gain on Foriegn exchange fluctuation a/c

Loss on Foriegn exchange fluctuation a/c Dr.

To Creditors a/c