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Purchases for the amount of EUR12000 were brought from one supplier in Italy and the invoice in payable within60 days in euro. The invoice was received in the company's account on May31st. the exchange rate is of euro to us$ was1 euro =1.30 and1.25 Us $ on may31st and June30th respectively.
Please prepare the required journal entries on May31st and June30th assuming that the company maintains its accounts in U.S dollars and closes its accounts on quarterly basis
Pass entry for Purchase based one Prevailing rate
12000/1.3 in the suppliers account and close the book while paying if the payment depends upon the prevailing rate pay accordinlgy pass the exchange difference to P&l account.it also depends contractual agreement between supplier and buyer if there is a fixed contract or forward contract or spot contract i hope this is right kindly enlighten me
Daily restrictions in//5
0 from account / foreign purchases
0 to account / supplier
Under daily in//6
0, from account / Procurement
To those mentioned
0, account / supplier
account / exchange rate differentials
Locks in the profit and loss account
from account / exchange rate differentials
to account / profit and loss
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