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

Mehta Exports Ltd sold goods to a UK customer on 1 February 2025 for GBP 10,000 at Rs 100 per GBP. On 31 March 2025 (balance sheet date) the rate was Rs 104. The customer paid on 15 May 2025 when the rate was Rs 101. What is the exchange difference to be recognised in the profit and loss of the year ended 31 March 2025, and in the following year?

A gain of Rs 40,000 arises in 2024-25 on restating the receivable from Rs 10,00,000 to Rs 10,40,000 at the closing rate. On settlement at Rs 101, receiving Rs 10,10,000, a loss of Rs 30,000 is recognised in 2025-26.

  1. AGain Rs 40,000 in FY 2024-25; loss Rs 30,000 in FY 2025-26Correct
  2. BGain Rs 10,000 in FY 2024-25; nil in FY 2025-26
  3. CGain Rs 40,000 in FY 2024-25; gain Rs 10,000 in FY 2025-26
  4. DNil in FY 2024-25; gain Rs 10,000 in FY 2025-26

Explanation

At 31 March 2025 the receivable is restated to 10,000 x 104 = Rs 10,40,000 against Rs 10,00,000, a gain of Rs 40,000. On settlement the receipt is 10,000 x 101 = Rs 10,10,000 against the carrying Rs 10,40,000, a loss of Rs 30,000 in FY 2025-26. Net gain over both years is Rs 10,000, but the option showing only that net figure in the first year ignores the year-end restatement.

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