Forward contract

What is a Forward Contract ? 

How the transactions are recorded in the books. pls. explain in detail

 

Replies (6)

1.In what context thgis question being asked.

2.OKAY is it concerning import and export of goods and services

Please clatify

Yes, u are right this is related to Export of Goods. 

in case of export you receive foreign currency, thus there is fear of fall in rate of foreign currency,to mitigate  this fear we enter into forward contract  with bank,where we sell the foreign currency receivable at a determined rate in future date,thereby reducing risk of foreing exchange fluctuation.

accounting treatment:

difference b/w purchased rate and booked rate is charged to p/l a/c

Dear Mr Bhavesh.C.Vyas  I share with you a very very little knowledge I have gained while working as a dealer in Foreign Dept of a nationalised bank

FX forwards

In general, often when people discuss foreign exchange (FX) transactions the option of a forward is raised.

èEssentially a forward contract is a contract/agreement to buy or sell a stated amount of a given currency at a specific price on an agreed date or range of dates in the future.

èA fixed forward contract is where a client sells one currency, in exchange for a different currency, for a set amount, at a specific price, for delivery on a specific date in the future. This is also called as swap or currency swap and it is normally between banks to square of their day end position

èAn option dated forward contract is where a client sells one currency, in exchange for a different currency, for a set amount, at a specific price, but for delivery between two dates in the future.

èFor both a fixed forward and an option dated forward, the contract is binding on both parties.  

 How to account it ? Mr Pawan Tewari has replied

For further details And regulation please refer the following circulars:-

  1. FEMA Notification:- FEMA/25/RB-2000 Dated 03/05/2000 and
  2. A.P(Dir Series) Circular No.32 dated 28.12.2010

Dear Mr I share with you a very very little knowledge I have gained while working as a dealer in Foreign Dept of a nationalised bank

FX forwards

In general, often when people discuss foreign exchange (FX) transactions the option of a forward is raised.

èEssentially a forward contract is a contract/agreement to buy or sell a stated amount of a given currency at a specific price on an agreed date or range of dates in the future.

èA fixed forward contract is where a client sells one currency, in exchange for a different currency, for a set amount, at a specific price, for delivery on a specific date in the future. This is also called as swap or currency swap and it is normally between banks to square of their day end position

èAn option dated forward contract is where a client sells one currency, in exchange for a different currency, for a set amount, at a specific price, but for delivery between two dates in the future.

èFor both a fixed forward and an option dated forward, the contract is binding on both parties.  

 

For further details And regulation please refer the following circulars:-

  1. FEMA Notification:- FEMA/25/RB-2000 Dated 03/05/2000 and
  2. A.P(Dir Series) Circular No.32 dated 28.12.2010

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