Currency conversion - Journal Entry - Printable Version +- Accountancy Forum (https://www.accountancy.com.pk/forum) +-- Forum: The Profession (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=4) +--- Forum: Accounting and Audit (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=7) +--- Thread: Currency conversion - Journal Entry (/showthread.php?tid=5494) |
Currency conversion - Journal Entry - faisal892 - 03-03-2009 Dear all, If a company has USD and Rupee bank accounts and it transfer USD 1000 from its USD account to its own Rupees account. What journal entry is to be passed. Regards Faisal. - awaisaftab - 03-04-2009 Just keep a dummy or contra account cash/asset accout in your ledger to transfer the difference in the dollar's rate and to show it in ballance sheet. Because you cannot show the ballance of dollars in balance sheet in terms of dollars. It must be transfered in terms of rupees for the purpose of financial reporting. If you transfer $ 1000/- in rupee account and dollar rate is Rs 81/- Rupee A/C ========= Dr.81,000/- Dollars A/C========= Cr. $1000 Dummy or Contra A/c==== Cr. Rs 80,000/- If any Bank Charges Deducted on conversion or transfer then following entry shall be passed. Rupee A/C ========= Dr Expense A/c=========Dr. Dollars A/C========= Cr. Dummy or Contra A/c==== Cr. - tariqab - 03-05-2009 Dear Now-a-days some companies are using Multiple currencies in ERP based accounting system, where transactions level forex rate are fixed as a base rate or flexible field as per requirment and at balance sheet currency differences are charges to Unrealized Forex Gain/(Loss). For Example your company has purchased raw material with cost of 1,0000 US$ on Credit(LC) that time rate was 1US$=79PKR. Transaction Level Difference Dr.=========Materials/Inventory/Purchase------->1000x79 79,000 Cr.============Supplier/AP/Creditor-----------------------> 79,000 While making payment rate is 1US$=80PKR. Dr.=========Supplier/AP/Creditor-------> 79,000 Dr.=========Realized Forex Loss---------> 1,000 Cr.============Bank Account-----------------------> 80,000 Balance Sheet Level Difference Maitaining Foreign current account Like Dollar a/c Suppose in your books one dollars showing balance of 195,000PKR.(US$ 2,500) as of balance sheet date= 01US$=80PKR For forex adjustment we have to pass following entry. Dr.===========Bank Account account (80-78)x 2,500---------> 5,000 Cr.==============Unrealized forex Gain-----------------------> 5,000 In your case as per my understanding Dr.=========PKR account------->1000x80 80,000 Cr.============US$ Account------------------>1000x80 80,000 and at the end or balance sheet date you will book Unrealized forex gain or loss for this dollar account. I hope you will get some idea from above intances. Regards Tariq |