As 11 applicability

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 January 2012 Is AS 11 applicable when u make advance payments to supplier in USD and get products aft 1week or so?. Is there need to compute fluctuation gain ?

Aijaz Shaikh

Aijaz Shaikh (Expert)
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01 January 2012 Yes applicable.

The following entries will be passed:-

Advance payment A/c Dr.
To Bank A/c

Purchases A/c Dr.
To Advance Payment A/c
To Exchange Gain A/c

Mahesh Paryani

Mahesh Paryani (Expert)
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01 January 2012 Dear Sir,

Please refer to the following thread for detail explanation with example.

https://www.caclubindia.com/experts/exchange-rate-variation--856210.asp

Regards

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 January 2012 As per Para 10 of AS-11, for practical reasons, a rate that approximates the actual rate at the date of transaction is often used, for example, an average rate for a week or a month might be used for all transactions occurring during that period.
However, if exchange rates fluctuate significantly, the use of average rate for a period is unreliable.

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So if Advance given and Purchases Transaction is taking place in a week within a normal period, there remains no need to recognise the exchange difference.