Karna Ltd., an Indian Company, has the following foreign currency transactions during the financial year 2025-26: (i) On 1st July, 2025, imported…

As per AS 11 “The Effects of Changes in Foreign Exchange Rates", Foreign currency monetary items should be reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency should be reported using the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on reporting an enterprise's monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, should be recognised as income or as expenses in the period in which they arise. (i) Items given in the question will appear in the Balance Sheet at the following values: Trade Payables (30,96,000/86= 36,000 German Currency) x 90 = 32,40,000Plant and Machinery 18,500 German Currency X 88 = 16,28,000Trade Receivables (50,40,000/84= 60,000 German Currency) x 90 = 54,00,000 (ii) Amount of gain / loss on each transaction on account of exchange difference: Exchange loss on Transaction of import of goods from Try Ltd. = ₹ (1,44,000) [36,000 German Currency X 4 (i.e. 90-86)]Exchange gain on Transaction of export of goods to Cream Ltd = 3,60,000 [60,000 German Currency X 6 (i.e. 90-84)]