Treatment in case of advance amount taken from foreign buyer(debtors) in Dollers, Entries in the books.

[Mahendra L]

Dear Sir/Madam.,

In case of Export of goods(by the Indian seller) we received payment in advance (from the foreign Buyer) in Dollars.Can we take this total advance amount received as sale value by converting in to Indian Rupees.on the date of sale. for avoiding foreign exchange gain/loss.What is the correct treatment.kindly suggest me with Accounting standard and New RBI Rules regarding foreign currency transactions.

Thanking You.,

Regards.,

mahendra.L

[DR.MARIAPPAN GOVINDARAJAN]

You yourself admitted as advance. Then how can it be accounted as sale value on the date of sales?

[Ganeshan Kalyani]

I agree with Mariappan Sir. the material movement and documentation with shipping too is a considering point to construe as sale.

[KASTURI SETHI]

Sh.MARIAPPAN GOVINDARAJAN Ji and Sh.Ganeshan Kalyani Ji,

Dear Sirs,

I have noted both of you often traced out answer from a query itself. It is an art. I am thrilled with your replies to this query. At the same time I hope questioner will not mind it.

[YAGAY andSUN]

Dear Mahendra,

Please check following:

1. Indian Accounting Standard (Ind AS) 115,Revenue from Contracts with Customers;
2. Ind AS - 021 : The Effects of Changes in Foreign Exchange Rates
3. Para B.8 (Advance Payments against Exports) of Master Direction – Export of Goods and Services issued by RBI on 01-01-2016.

Advance payment against Exports will be reflected in FIRC, and FIRC would be converted into BRC at the time of balance sales proceeds as and when remitted by you counterpart. However, Foreign Exchange fluctuation would be accounted for as per the Ind AS 115.

Please also discuss it with your CA to dig deeperordiscuss it with your Authorized Dealer.

May God Bless you!

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Mahendra L]

Thank You Sir.,

AI Summary

Advance payments in foreign currency should be treated as advance receipts until export; foreign exchange effects follow accounting standards. Advance payments in foreign currency for exports must be recorded as advance receipts until goods are dispatched and documentation supports sale. Such receipts are evidenced by a FIRC and converted to a BRC upon remittance of final proceeds, while foreign exchange gains or losses are accounted for under the applicable foreign exchange translation and revenue recognition standards. Consult a chartered accountant or Authorized Dealer for transactional compliance with central bank directions.