06 April 2010
You can account for the exchange rate variation or fluctuation in two ways:-
Firstly for monetary transaction for which you are liable to pay or can receive in monetary terms like debtors and creditors. For these kind of transaction or items, you have to calculate exchange rate fluctuation at the end of financial year or value the above items at the closing exchange rate as on last date of the year end. Difference should be transferred to profit and loss account.
Secondly for non-monetary items other than monetary items like fixed assets etc. For these kind of items, you need not to do anything at the year end.
For those transactions settled during the year,exchange fluctuation to be booked in the profit and loss account with actual exchange gain or loss
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