Trade payables of CAT Ltd. include amount payable to JBB Ltd.,10,00,000 recorded at the prevailing exchange rate on the date of transaction,…
CA Intermediate · Advanced Accounting · MTP · May 2025
Trade payables of CAT Ltd. include amount payable to JBB Ltd.,10,00,000 recorded at the prevailing exchange rate on the date of transaction, transaction recorded at US $1 = 80.00. The exchange rate on balance sheet date (31.03.2024) was US $1 = 85.00. You are required to calculate the amount of exchange difference and also explain the accounting treatment needed for this as per AS 11 in the books of CAT Ltd.
Suggested Answer and Working Notes:
Amount of Exchange difference and its Accounting Treatment Foreign Currency Rate ₹ Trade payables Initial recognition US $ 12,500 (₹ 10,00,000/80) 1 US $ = 80 10,00,000 Rate on Balance sheet date 1 US $ = 85 Exchange Difference loss US $ 12,500 x ₹ (85-80) 62,500 Treatment: Debit Profit and Loss A/c by - 62,500 and Credit Trade Payables Thus, Exchange Difference on trade payables amounting - 62,500 is required to be transferred to Profit and Loss.
Topics: AS 11
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