Skip to content

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

Sagar Engineering Ltd purchased a machine from a US supplier on 10 January 2026 for USD 20,000 and paid the full amount on the same day when the rate was ₹80 per USD. On 31 March 2026 the closing rate was ₹83 per USD. At what amount should the machine be carried in the balance sheet on 31 March 2026, before depreciation?

The machine is carried at ₹16,00,000. It is a non-monetary item measured at historical cost, so it stays at the exchange rate on the date of purchase (USD 20,000 × ₹80). The closing rate does not apply to it.

  1. A₹16,00,000Correct
  2. B₹16,60,000
  3. C₹16,30,000
  4. D₹60,000

Explanation

A machine is a non-monetary item carried at historical cost, so it is reported at the rate on the date of the transaction: USD 20,000 × ₹80 = ₹16,00,000. Restating it at the closing rate of ₹83 (₹16,60,000) would be wrong because the closing rate applies only to monetary items.

Did you get it right without looking?

One question tells you little. A timed set on AS 11 The Effects of Changes in Foreign Exchange Rates shows your real accuracy, how long you take and where you lose marks.

Practise AS 11 The Effects of Changes in Foreign Exchange RatesFree diagnostic mock

More AS 11 The Effects of Changes in Foreign Exchange Rates questions