Hi megha12

I believe you meant to ask where the FX gain for year end and at the date of transaction would be presented in the main financial statements

First part :

When you calculate the inventory costing 400000 on 1 december 2015 – you record the transaction using the exchange rate as at the date (1 Dec 2015)
This will be your inventory value for this transaction at the year end : 97561 USD – we debit to the SOFP at the year end (positive amount shown in the SFP/ Increase in Inventory)

The payable recorded will however be that 400000 dinar converted at the exchange rate for the year end – giving 93,023 USD , this is different to the inventory value so we have a gain of (97561 USD – 93,023 USD) of 4538 , this is the excess amount that is realised as a profit in the PLA as Foreign exchange gain for the year end.

On the 10 January 2016 we need to reverse the payable amount as it mentions that Jones has paid for the goods so we use the exchange rate to convert 400000 dinars to get 90,909 that is a credit to the bank – as we pay this amount , The payable we recorded was at historical amount 93,023 as at year end and the difference to this of 2,114 USD which is how much of excess Dr balance needs to balance out with a corresponding credit balance as the gain we will realize when the amounts are paid of Cr, 2114 USD as foreign exchange gains which will be found in the PLA in the operating costs section

Hope this summary was helpfull 🙂

Comments

megha12 says
August 11, 2020 at 12:43 am
Hi,
Hope you’re keeping well and safe.
I am writing for the first time, so before I inquire anything I wanted to thank openTuition team for all the videos and resources.
So, could you please confirm how we are gonna treat Unrealized gain (UGL) on 31 Dec 2015 in SPL and realized FX gain (RGL) on 10 Jan 2016.
I am just trying to understand their treatment and representation under financial statements.
Thanks!
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- lasid says
  October 14, 2024 at 9:03 pm
  Hi megha12
  I believe you meant to ask where the FX gain for year end and at the date of transaction would be presented in the main financial statements
  First part :
  When you calculate the inventory costing 400000 on 1 december 2015 – you record the transaction using the exchange rate as at the date (1 Dec 2015)
  This will be your inventory value for this transaction at the year end : 97561 USD – we debit to the SOFP at the year end (positive amount shown in the SFP/ Increase in Inventory)
  The payable recorded will however be that 400000 dinar converted at the exchange rate for the year end – giving 93,023 USD , this is different to the inventory value so we have a gain of (97561 USD – 93,023 USD) of 4538 , this is the excess amount that is realised as a profit in the PLA as Foreign exchange gain for the year end.
  On the 10 January 2016 we need to reverse the payable amount as it mentions that Jones has paid for the goods so we use the exchange rate to convert 400000 dinars to get 90,909 that is a credit to the bank – as we pay this amount , The payable we recorded was at historical amount 93,023 as at year end and the difference to this of 2,114 USD which is how much of excess Dr balance needs to balance out with a corresponding credit balance as the gain we will realize when the amounts are paid of Cr, 2114 USD as foreign exchange gains which will be found in the PLA in the operating costs section
  Hope this summary was helpfull 🙂
  Log in to Reply

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