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    Question

    A company imports machinery payable in USD after 6

    months. If the liability remains unpaid at year-end and the exchange rate has increased, how should the difference be accounted for?
    A Ignore till settlement. Correct Answer Incorrect Answer
    B Recognise as exchange loss in P&L. Correct Answer Incorrect Answer
    C Capitalize into cost of machinery mandatorily. Correct Answer Incorrect Answer
    D Recognise as OCI item. Correct Answer Incorrect Answer
    E Transfer to reserves. Correct Answer Incorrect Answer

    Solution

    Foreign currency monetary items (like creditors) are restated at closing rate, and the exchange difference goes to P&L, unless it relates to qualifying assets (then eligible for capitalization under Ind AS 23).

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