Exchange gain and loss

[Shahzad09]

Dear Kamran,

Thanks for the knowledge, please help what to do in below case


prepaid.......10..(ex.rate conversion x10)..100
...cash...........10.............................100

<b>Which one is correct ?</b>
(using last week avg. as per company policy for expenses)
expense.......5...(current ex.rate conversion x11)... 55
....prepaid.......5.........................................50
....exchange gain............................................5

or

(expense is recorded at the same ex.rate when prepaid is created)
expense.......5..(same ex.rate at the time of prepaid)..50
....prepaid.......5..........................................50