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A Vendor has raised invoice for £ (GBP)1500 against company "X" on05thJun for supply of goods. Exchange rate on05thJun is1GBP =1.56 USD. The company "X" is reporing financials in currency USD. Exchange rate on30th Jun is1GBP =1.62 USD. The company has not settled to that vendor till30th June.
A. Realised gain USD90.
B. Realised loss USD90
C. Unrealised Loss USD90.
D. Unrealised Gain USD90.
un realised loss USD90--------------------------
C. Unrealised Loss USD90. Since company X has not settled its liability the increase in the rate means an increase in the outstanding payments to the vendor by company X.
thus on5/06 oustanding amount =1.56 x1,500 =2,340
on30/06 oustanding amount =1.62 x1,500 =2,430 giving a difference of USD90
Though X company not settled the vendor until30th June It should be realized as a loss of USD90. But if there would be a gain this would not be immediately chargeable until and unless settled the vendor account balance.
Answer is B. On June30, there will be a loss of USD90.00