05 February 2018
One of my client engaged in Export of Goods and import of goods.During the year ended company has purchases a goods from America and it was in transit. so company has recorded it as "Material in Transit" on 31/03/2017 at on prevailing exchange rate of Rs.50/$. the entry has been made as followed by the company
Material in Transit A/c Dr. Material Value*50 To Party Material Value*50
On 15.04.2017 the company has received goods. and on that date foreign exchange rate prevailing Rs. 55. The Company again recorded the goods as follows:
Purchases A/c dr. Material Value*55 To Party Material Value*55
and after receiving of Goods the company has reverse the Entry which was posted on year 31.03.2017 The reversal entry was as followed:
Party Ac/ Dr. Material Value* 50 To MIT Material Value*50
If we posted purchases @ 55, it means that we clubbing the Exchange difference (55-50)=5 in current year. Its my opinion the purchases should be posted @ 50 and difference should be posted as foreign exchange if payment made to party. Because we already posted MIT in preceeding year.
08 February 2018
As per AS 11, (b) income and expense items of the non-integral foreign operation should be translated at exchange rates at the dates of the transactions; So exchange rate as on the transaction date to be considered.
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