I have a query regarding foreign exchange difference to be charged in profit and loss account.
Example:
a company is purchasing goods from local as well as from foreign countries.
suppose a company have purchased goods from Malaysia purchase invoice - 80000$
advance payment 30% - 24000 @ 45.99 rs 1103760
balance payment 70% - 56000 @ 46.59 rs 2609040
rate of $ 45.99 and 46.99 are as per bank advice provided by bank during payment.
1) company is recording the transaction by using 46.59 rs per $ rate for full bill. I.e 80000 @ 46.59 rs per $(80000 @ 46.59 = 3727200)(3727200-1103760-2609040 = 14400 charging toward foreign exchange difference in books of accounts
or taking an average of both the rates (45.99+46.59/2)for recording purchase in books of accounts
Question:
what would be the actual policy followed by company in the above case?
CAclubindia
