Treatment of forex fluctuation

This query is : Resolved

purnima (Querist)
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27 May 2014 (1) When Invoice is raised in USD, the entry will be:

USD @ 60
USD INR
Dr. Debtor 1,000 60,000
Cr. Sales 1,000 60,000

(2) On receipt of the amount, the entry will be: USD @ 62

USD INR
Dr. Bank 1,000 62,000
Cr. Debtors 1,000 60,000
Cr. Forex Gain (Realised) - 2,000

Is it correct to recognize the Gain as realised Gain?

Nitin Bhuta

Nitin Bhuta (Expert)
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27 May 2014 yes treatment is correct

purnima

purnima (Querist)
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28 May 2014 But when the amount is credited in EEFC Account, it will be in Foreign currency. Then how can it be Realised gain?

Only when USD is conveted into INR, the Forex fluctuation comes.

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Nitin Bhuta

Nitin Bhuta (Expert)
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29 May 2014 when monies are credited from EEFC account to your local account, you know the Foreign exchange rate then you should account for gain accordingly or if monies lying at the year end in EEFC account then you need to recognise the same by converting the balance at the prevailing rate at the year end date and recognise gain accordingly.