i have trf. 13334.13 usd to hongkong but in A2 form thier is one point regarding bank charges where we have to select that who is going to bear bank charges, that is as follows
1) ALL LOCAL AND OVERSEAS CHARGES TO BE BORNE BY BENEFICIARY 2) ALL LOCAL AND OVERSEAS CHARGES TO BE BORNE BY REMITTER 3) LOCAL CHARGES TO BE BORNE BY REMITTER AND OVERSEAS CHARGES BY BENEFICIARY
I selected point no. (1) and just came to know from bank that they have done short payment of 31 USD ( may be bank deducted 31$ as his charges )but
my query is this
1) how should i pass the entry regarding payment made to party means i have made payment of full amount but the bank paid short to him, so it is any type of gain to me means currency gain or something related to that
because i am going to debit full amount of his ledger but due to this difference amount i can't pass entry so please help me out
02 August 2024
Handling bank charges and discrepancies in foreign transactions can be complex. Here’s a detailed guide on how to record these transactions in your books and manage the accounting for bank charges and short payments.
### 1. **Understanding and Recording Bank Charges**
When you receive less than the amount transferred due to bank charges by the sender’s bank, you need to account for this discrepancy properly. Here’s how you can handle it:
#### **Recording Bank Charges**
**Scenario**: You receive $45 instead of $50 due to $5 bank charges by the sender's bank.
1. **Journal Entry for Bank Charges**: - **Bank Charges (Expense)**: Debit the bank charges account to record the expense. - **Bank Account**: Credit the bank account to show the actual amount received.
**Example Entry**: ```plaintext Bank Charges Account Dr. $5 Bank Account Cr. $5 ```
#### **Handling Discrepancies in Foreign Transactions**
**Scenario**: You transferred $13,334.13 to Hong Kong, but only $13,303.13 was paid, with a $31 shortfall due to bank charges.
1. **Journal Entry for the Shortfall**: - **Party Account**: Debit the full amount as per the invoice. - **Bank Account**: Credit the actual amount paid. - **Bank Charges Account**: Debit the shortfall amount as bank charges or other expenses if you cannot clearly attribute it.
**Example Entry**: ```plaintext Party Account Dr. $13,334.13 Bank Account Cr. $13,303.13 Bank Charges Account Dr. $31 ```
### 2. **Handling the A2 Form and Payment Discrepancies**
**A2 Form Options**: 1. **All Local and Overseas Charges to be borne by Beneficiary**: This means the beneficiary’s bank charges are borne by the beneficiary. 2. **All Local and Overseas Charges to be borne by Remitter**: This means you (the remitter) will bear all bank charges. 3. **Local Charges to be borne by Remitter and Overseas Charges by Beneficiary**: This means you will pay local charges, and the beneficiary will pay overseas charges.
**Scenario**: You selected option (1), and a short payment of $31 was made by the bank.
1. **Bank Charges or Short Payment Handling**: - If your selected option (1) means the beneficiary should bear the charges, and there was a shortfall, the bank charges are not directly your responsibility. - However, if you face a shortfall, you need to handle it in your books, usually as a bank charge or loss due to foreign exchange.
**Example Entry**: ```plaintext Party Account Dr. $13,334.13 Bank Account Cr. $13,303.13 Bank Charges Account Dr. $31 (if not borne by the beneficiary but incurred by you) ```
### 3. **Currency Gain/Loss Consideration**
- **Currency Gain/Loss**: If there is a discrepancy due to currency fluctuations or charges, this could impact your foreign currency gains or losses. Typically, short payments due to charges are not considered a gain but rather an additional expense.
**Recording Currency Gain/Loss**: - If there is a currency fluctuation gain or loss (i.e., differences due to exchange rates), you will need to adjust your accounts accordingly. This is usually recorded in a Currency Fluctuation Gain/Loss account.
**Example Entry for Currency Fluctuation**: ```plaintext Currency Fluctuation Loss (if applicable) Dr. $31 Bank Account Cr. $31 ```
### Summary
1. **Record bank charges** as an expense in your books. 2. **Handle short payments** by debiting the party account for the full amount, crediting the bank account for the actual amount paid, and recording the shortfall as a bank charge. 3. **Choose the correct A2 form option** based on who bears the charges and ensure your entries reflect the actual situation. 4. **Monitor currency gains or losses** if applicable, and record them accordingly.
If you have discrepancies and issues with bank charges or short payments, it’s always a good idea to consult with your auditor or accountant for precise handling according to your accounting policies and regulations.
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