CA Inter P1 · Chapter 5 · Question 7 of 12
Case: Narmada Electronics Ltd imported goods on credit for USD 20,000 when the exchange rate was ₹82 per USD. At the balance sheet date the rate was ₹84, and the payable was settled in the next year at ₹83. The exchange difference to be recognised in the year of import under AS 11 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Loss of ₹40,000
Explanation
A foreign currency payable is a monetary item and must be reported at the closing rate under AS 11. Exchange loss = USD 20,000 x (84 - 82) = ₹40,000, recognised in that year's profit and loss. In the next year, settlement at ₹83 gives a gain of USD 20,000 x (84 - 83) = ₹20,000.
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