forex difference

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Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2010 we have purchased material from Germany against 60 days LC credit, we have booked purchase as per forex rate as per bill of entry at the time of clearance of goods and made payment after 60 days at that time forex rate is highr than purchase rate, now my question is that, whether difference amount will be added in purchase or it is to be shown under the head forex rate differnce.

Srikant

Srikant (Expert)
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16 July 2010 Its good Question
See the Purchase has been booked @ on the date of BOE.
When the at the time of payment the there is an increase in liability due to Currency Fluctuations you should recognise this as a loss due to fluctuations and transfered to P/L a/c.

At the same time if there would have been any Capital goods purchased instead of material, it would have been capitalised by adding the value of material and simultaneously the value of creditors / payables.

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