19 May 2008
Can any one guide me about the accounting treatment of the FOREIGN EXCHANGE TRANSACTION? The details of the transaction are as mentioned below;
Purchase Order of Machinery 07.06.07 Euro 100 Ex. rate : Rs. 54/euro
Advance payment 11.06.07 Euro 20 Rs. 54.95/euro
LC issued 15.11.07 Euro 80 Rs. 56/euro
1st Invoice date 31.12.07 Euro 70 Rs. 57/euro
Payment against 1st invoice 18.02.07 Euro 60 Rs. 58.42/euro
2nd Invoice 31.01.08 Euro 30 Rs. 57.75/euro
Payment against 2nd Invoice 07.03.08 Euro 20 Rs. 62/euro
Erection & Commissioning Adv payment 03.04.08 Euro 5 Rs. 62.60/euro
Invoice of Erection & Commg. 30.04.08 Euro 5 Rs. 64/euro
I have recorded the payments at actual amount paid.
Now I am confused about the accounting of fixed assets that at which rate I shall account the both invoice and how to adjust the difference arising due to exchange difference?
20 May 2008
In many overseas contracts entered into between Indian parties in currencies other than INR, Accountants need to face with the challenge of treating the exchange fluctuation in thier books of accounts. Normally any forex loss/gain in overseas transaction with a revenue nature will be recognized thorugh the profit & loss account by taking a reference forex rate/prevailing rate for booking the transaction in the books of accounts.Since ,in your case, an asset is built up through the transaction ,the actual INR spent for buying the EURO can be the cost of your assets as you are booking the asset in Indian currency. For this purpose you may net off the loss/gain and book such net loss/gain to the asset in question.
Guest
Guest
(Querist)
20 May 2008
thanks satish k sekhar
it means i shall book the asset at the exchange rate prevaling as on the date of invoice and the difference in the exchange loss shall be treated as loss/gain and to be accounted in p&l account.