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Foreign Currency Valuation

Former Member
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Hi Gurus

For FCV plz validate my entries and also plz tell me where in the scene Balance Sheet Adjustment a/c comes .

On 01.03.08

Exp Dr 100

To vendor 100

on 31.03.08 due to rise in EX rate

loss on exchange rate Dr 5

To Vendor 5

on 15.04.08 further rise in EX rate

Vendor Dr 105

Loss on exchange Dr 5

To bank 110

Also plz tell me what is the use of reversal of the entry.

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Answers (2)

Answers (2)

Former Member
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thnx for the reply but i am still not able to understand the role of B/S adj a/c and gain or loss on forex a/c.

and also abt reversal.

Please be more explanatory.

Former Member
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This concept of reversal is not mandatory. But, some clients asked for this. This is for generating the exact reports as on date - that means - you have to show the amounts in local currency as on date, but you have done the purchases in different currency, because of the change in the exchange rate the amount payable by you also go up / down. You are showing the reports as on date what is payable amounts in the B/S. To have this you have to recognize the loss/profit even if it is not recognized.