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CA Intermediate · Advanced Accounting · AS 11 The Effects of Changes in Foreign Exchange Rates

Anvay Ltd bought raw materials from a UK supplier on 1 March 2026 for GBP 5,000 at Rs 100 per GBP. The balance sheet date is 31 March 2026, when the rate was Rs 104. The payment was made on 15 May 2026 at Rs 102. The year-end is 31 March for the company. What exchange difference is recognised in the profit and loss of the year ending 31 March 2027 in respect of this payable?

A gain of Rs 10,000 is recognised in the year ending 31 March 2027. The payable was carried at Rs 5,20,000 at the previous closing rate of Rs 104 and settled for Rs 5,10,000 at Rs 102, so the settlement difference is measured from the closing carrying amount.

  1. AGain of Rs 10,000Correct
  2. BLoss of Rs 20,000
  3. CLoss of Rs 10,000
  4. DGain of Rs 20,000

Explanation

At 31 March 2026 the payable was restated to 5,000 x 104 = Rs 5,20,000 (loss Rs 20,000 in the earlier year). It was settled at 5,000 x 102 = Rs 5,10,000. The difference on settlement is measured from the closing carrying amount: 5,20,000 - 5,10,000 = Rs 10,000 gain in the next year. Rs 20,000 loss belongs to the earlier year.

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