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Invoice raised in usd

Shubham Singhal (Student- ICAI) (175 Points)

13 September 2013

A pvt. ltd. company is providing services to a mnc. the service is provided in delhi and invoice is raised to the co. in us dollars to us office. Now suppose a service is to be provided by pvt ltd co for 8lakhs incld service tax, on 1.4.2013 it raises performa invoice for 16000USD @ 50rs. in oct pvt ltd co gives invoice to mnc @ 60rs per usd and now in sep the payment is rcd by pvt ltd co for 65rs per usd. My ques is at what price the invoice has to be recorded in books and what will be the foreign exchange fluctuation profit.

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7 Replies

Shubham Singhal (Student- ICAI) (175 Points)
Replied 14 September 2013

Seniors please reply.................

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Shubham Singhal (Student- ICAI) (175 Points)
Replied 14 September 2013

hey, nobody knows the answer, where are the genius of cci

Samrendra (Asst. Manager- Internal audit) (221 Points)
Replied 19 September 2013

Dear Shubham,

Revenue has been recognized when Invoice is raised (not issued) to MNC Company. Conversion to local currency is made by the rate prevailing on that day.

Revenue Recognized = $ 16,000*50 = Rs. 8,00,000

At the time of receipt actual convertible amount received by Private Company. i.e. $ 16,000*65= Rs. 10,40,000.

Therefore Exchange Fluctuation Gain from this transaction is Rs. 10,40,000 - Rs. 8,00,000 = Rs. 2,40,000

Note: It has assumed that revenue and payment is received in same Financial Year.

Shubham Singhal (Student- ICAI) (175 Points)
Replied 19 September 2013

But the inv

Originally posted by : Samrendra

Dear Shubham,

Revenue has been recognized when Invoice is raised (not issued) to MNC Company. Conversion to local currency is made by the rate prevailing on that day.

Revenue Recognized = $ 16,000*50 = Rs. 8,00,000

At the time of receipt actual convertible amount received by Private Company. i.e. $ 16,000*65= Rs. 10,40,000.

Therefore Exchange Fluctuation Gain from this transaction is Rs. 10,40,000 - Rs. 8,00,000 = Rs. 2,40,000

Note: It has assumed that revenue and payment is received in same Financial Year.

But the invoice is entered in the books @ 65/- bcoz that day on which invoice is issued to MNC the USD is @ 65/-........ The Performa Invoice was @ 60/-. We dont enetr PI in books.

Samrendra (Asst. Manager- Internal audit) (221 Points)
Replied 19 September 2013

Dear Shubham,

Revenue can only be recognized after completion of service I thought service completion date is same as of raising of proforma Invoice.

Date on which conversion rate was 65 is payment date by MNC. Service might have rendered to them before payment.

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Shivani (Learner) (1881 Points)
Replied 20 September 2013

samrendra sir

what will be the entries?

both of invoice and of exchange rate gain/loss.

thanks

shivani

Samrendra (Asst. Manager- Internal audit) (221 Points)
Replied 22 September 2013

Dear Shivani,

Revenue can be recognized after completion of services. Assuming Services has rendered by Private limited company after issue of Proforma Invoice (Exchange Rate 50) but before issue of original Invoice (Exchange Rate 60).

Debtor/ Receivable A/c Dr. 960,000

To Sales 960,000

(being services rendered to xyz for USD 16,000 at conversion rate of Rs. 60)

AT THE TIME OF RECEIPT OF PAYMENT

Bank A/c Dr. 1,040,000

To Debtor 960,000

To Foreign Exchange Gain 80,000

(being payment of USD 16,000 received from xyz, Conversion rate 65)

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