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Foreign exchnage diff accounting

c.Mahadev (accounatant) (60 Points)

30 April 2012

Example : Company sold material to ABC Company on 01.08.2010 USD 2000 x 45.00 = 90000 but payment is still due on 31.03.2012

Exchange rate on 31.12.2010 - 46, 2011-47

Can I pass Foreign exchange gain on the following year

in 2010

Dr ABC Co 2000

Cr.Foreign exchnage gain 2000

in 2011

Dr abc & Co. 2000

Cr forex gain 2000

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7 Replies

Prasad (Sr. Manager) (617 Points)
Replied 30 April 2012

yes you are right in your forex entries, however as per FEMA guidelines exporters have collect within time frame specified and your outstanding is for more than 1.5 years.

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c.Mahadev (accounatant) (60 Points)
Replied 07 September 2012

Dear aii,

My auditor says that no need to account forex unrealised gain.Is it true?

T S D ( ) (236 Points)
Replied 07 September 2012

You are correct according to your journal entries except for that the date you have mentioned should be 31.03.2010 and 31.03.2011(For exchange rates).

c.Mahadev (accounatant) (60 Points)
Replied 08 September 2012

kindly note it is not clear as many people told me no need to book unrealised exchnage gain.If it is loss we can book it .Any expert can help on this .

T S D ( ) (236 Points)
Replied 10 September 2012

The purpose of booking exchange fluctuation is to depict the position as on 31st March. The concept of prudence should not be applied to "Foreign exchange fluctuation account".

I may stand corrected if I was wrong.

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c.Mahadev (accounatant) (60 Points)
Replied 11 September 2012

Assume that I have USD 30,000 to be colletcd from Debtors.Exchnage rate on the date of Sales 47 and rate on 31.12.2011 @ 49 = Unrealised forex gain =60,000

I have to pay supplier USD 10,000 .Booking rate was 47 and closing rate 49 unrealised loss=20,000

should I debit 40,000 in Forex Gain account in P&L or just leave without recognising it in books

T S D ( ) (236 Points)
Replied 11 September 2012

Sir,

To be clear,

Fluctuation is to be booked only if the amount is outstanding on the date of the balance sheet. In your case, the date you have mentioned is 31.12.2011. If the date you have mentioned is the date of balance sheet, the gain of Rs. 60,000/- should be booked. Until then, the balance in the debtor account will be Rs.14,10,000/- (Rs.47 x USD 30000) only. Kindly refer to AS - 11.