ACCOUTING TREATMENT OF FOREIGN TOUR EXPENSES
This query is : Resolved
03 April 2009
A Director of XYZ Ltd. went on Foreign Tour for business Purpose and following expenses were incurred on that tour.
Hotel Stay Charges (on 21.05.08) USD 2000
Telephone Exp. (on 22.05.08) USD 50
Taxi Hire Charges (---D0---) USD 150
Shopping Bill (---DO---) USD 750
Amusement Park Bill(on 23.05.08) USD 250
Total USD 3200
a) What Accounting entry will be passed for the above expenses?
b) What exchange rate will be used for translation of USD 3200 into INR?
c) Whether Shopping Bill and Amusement Park Bill will be allowed as expenses to XYZ Ltd. or not?
d) Whether expenses mentioned in (c) above are Director's personal expenses?
If yes then which expense head will be debited for those expenses.
Hotel Stay Charges (on 21.05.08) USD 2000
Telephone Exp. (on 22.05.08) USD 50
Taxi Hire Charges (---D0---) USD 150
Shopping Bill (---DO---) USD 750
Amusement Park Bill(on 23.05.08) USD 250
Total USD 3200
a) What Accounting entry will be passed for the above expenses?
b) What exchange rate will be used for translation of USD 3200 into INR?
c) Whether Shopping Bill and Amusement Park Bill will be allowed as expenses to XYZ Ltd. or not?
d) Whether expenses mentioned in (c) above are Director's personal expenses?
If yes then which expense head will be debited for those expenses.
03 April 2009
If the company has purchased the USD and then given to director before leaving the country and spent there. Then the rate at which we purchased should be the rate for the translation. If the payment is post factor then the rate on actual payment has to be considered.
Shopping bill and ammusement park bill if he only has gone there then it will go to staff welfare expenses.
If shopping bill and ammusement park bill pertains to people alongwith foreign vendor then it will be charged to business promotion expenses.
Threfore the entry will be
Telephone expenses
Conveyance
Staff welfare / business promotion
has to be debited and
credit should be to director travel advance if you have already entered the travel advance at the time of director leaving the country.
Shopping bill and ammusement park bill if he only has gone there then it will go to staff welfare expenses.
If shopping bill and ammusement park bill pertains to people alongwith foreign vendor then it will be charged to business promotion expenses.
Threfore the entry will be
Telephone expenses
Conveyance
Staff welfare / business promotion
has to be debited and
credit should be to director travel advance if you have already entered the travel advance at the time of director leaving the country.
03 April 2009
SIR,
SAY COMPANY HAD PURCHASED US $ @ RS 50.45 ON 18.05.08 AND GIVEN TO THE DIRECTOR.
NOW AS PER YOUR REPLY INVOICE SHOULD BE BOOKED @ RS 50.45 PER US$.
BUT IF I BOOK INVOICES AT THE RATE PREVAILING ON RESPECTIVE DATES AND TRANSFER THE DIFFERENCE BETWEEN RS 50.45 AND RESPECTIVE RATES T "EXCHANGE DIFFERENCE A/C". WILL IT BE WRONG ?
FURTHER SHOPPING BILL AND AMUSEMENT PARK BILL RELATES TO DIRECTOR AND HIS RELATIVES RESIDING IN FOREIGN. NOW WHETHER THESE BILL STILL BE POSTED UNDER
"BUSINESS PROMOTION"
OR
WILL BE TREATED AS "DIRECTOR PERSONAL EXP."
IF PERSONAL EXP. THEN WHAT WILL BE ACCOUNTING ENTERY IN COMPANY BOOKS ?
EAGERLY WAITING FOR REPLY
SAY COMPANY HAD PURCHASED US $ @ RS 50.45 ON 18.05.08 AND GIVEN TO THE DIRECTOR.
NOW AS PER YOUR REPLY INVOICE SHOULD BE BOOKED @ RS 50.45 PER US$.
BUT IF I BOOK INVOICES AT THE RATE PREVAILING ON RESPECTIVE DATES AND TRANSFER THE DIFFERENCE BETWEEN RS 50.45 AND RESPECTIVE RATES T "EXCHANGE DIFFERENCE A/C". WILL IT BE WRONG ?
FURTHER SHOPPING BILL AND AMUSEMENT PARK BILL RELATES TO DIRECTOR AND HIS RELATIVES RESIDING IN FOREIGN. NOW WHETHER THESE BILL STILL BE POSTED UNDER
"BUSINESS PROMOTION"
OR
WILL BE TREATED AS "DIRECTOR PERSONAL EXP."
IF PERSONAL EXP. THEN WHAT WILL BE ACCOUNTING ENTERY IN COMPANY BOOKS ?
EAGERLY WAITING FOR REPLY
03 April 2009
Exchange difference is an account where we account for the difference between recorded date of event and the actual payment for the event.
In the above case it is an expenditure by the company and the transaction was complete when you have purchased the currency. It is immaterial about the fluctuation on which day he has spent and exchange difference will not arise.
Because you are clearly mentioning it is for his personal expenses. Director personal expenses cannot be debited to the company's account and it should be a part of his salary payment or adjust against his remuneration.
Remuneration
To Travel Advance
Please note that you cannot pay in advance or salary advance to director because as per income tax it becomes a deemed dividend in his personal file.
In the above case it is an expenditure by the company and the transaction was complete when you have purchased the currency. It is immaterial about the fluctuation on which day he has spent and exchange difference will not arise.
Because you are clearly mentioning it is for his personal expenses. Director personal expenses cannot be debited to the company's account and it should be a part of his salary payment or adjust against his remuneration.
Remuneration
To Travel Advance
Please note that you cannot pay in advance or salary advance to director because as per income tax it becomes a deemed dividend in his personal file.
Message likes :
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03 April 2009
THANK YOU VERY MUCH SIR REGARDING PROMPT REPLY.
IN DEED YOU ARE VERY KIND AS YOU ARE SPENDING YOUR PRECIOUS TIME IN ANSWERING MY QUERIES.
IN DEED YOU ARE VERY KIND AS YOU ARE SPENDING YOUR PRECIOUS TIME IN ANSWERING MY QUERIES.
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