Susmita Dutta, CA , CPA (CA ) (2141 Points)
26 June 2021Should a credit note be processed at the same foreign exchange rate as the original invoice, even when the invoice is several months prior? Or should the current FX rate be used and and exchange gain/loss be calculated?
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 26 June 2021
This is a contract issue. If the seller promises to reimburse in local currency, you can adjust the amount of goods returned to current rate and no need for FX translation. If the seller does not wish to reimburse with the current terms, you have to recognise FX translation gains or losses.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 26 June 2021
Purchased 1000₹ worth goods
By Purchases 1000₹
To Bank a/c 1000₹
When goods returned
By Returns a/c 500₹
To Purchases a/c 500₹
inventory was recorded as
CoS a/c 500
To Inventory a/c 500₹
seller issues credit note on current currency which is 1₹ more on 1₹ Previously
Purchases 500₹
To fx Gain 500₹
And adjustments again
CoS a/c 1000₹
To Inventory 1000₹
This must tally
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 26 June 2021
Sorry bout this, didn’t give much thought about bs equation
On credit note at current cost
Purchases a/c 1000₹
To Returns a/c 500₹
To Revaluation reserve a/c 500₹
then inventory is adjusted to profit and loss
Cos a/c 1000₹
To Inventory a/c 1000₹
Bank -1000
Inventory 1500
assets = 1500
then Retained earning increased by 1000₹ after cancelling inventory and cos (Purchases)
retained earnings 1000₹
Reval reserve 500₹
Liabilities 1500₹
CAclubindia
