This document discusses two approaches to recording foreign currency transactions - the single transaction approach and the dual transaction approach. Under the single transaction approach, the initial transaction is recorded at the exchange rate on the transaction date, and any differences due to exchange rate changes are recorded separately. Under the dual transaction approach, both the initial transaction and any exchange gains or losses are recorded separately from the beginning. The document provides a problem example and journal entries to illustrate how each approach would record a foreign purchase with payments made on different dates than the purchase date.

1. TOPIC:
Problem on single and dual transaction approach
Under the guidance of
Sundar B. N.
Asst. Prof. & Course Co-ordinator
GFGCW, PG Studies in Commerce
Holenarasipura
.
Presentedby,
rachana h s
2nd m.com.
g f g c w.
holenarasipura.

2. FOREIGN CURRENCY TRANSLATION:
Foreign currency translation
is the restatement, in the currency in
which a company presents it’s financial
statements, of all assets, liabilities,
revenues, expenses, gains and losses that
are denominated in foreign currencies.

3. RECORDING OF FOEIGN TRANSACTION:
Recording of foreign transactions depends on two broad
issues.
1.The date of the transactions such as.
a. The Initial transaction date.
b. The interim Reporting date.
c. The settlement date.
2. The Recording Method Such as.
a. The Single Transaction approach.
b. The Dual Transaction approach.

4. ISSUES AFFECTING RECORDING OF FOREIGN TRANSACTION.
“DATE OF TRANSACTION”
1.Date of
Initiation.
2.Interim date of
reporting.
3.Date of
settlement.

5. SINGLE ENTRY SYSTEM.
A single entry system
records Each accounting
transaction with a single entry to
the accounting records. Rather
than the more common double
entry system. The single entry
system is centered on the results of
a business that are reported in the
income statement.

6. DUAL ENTRY SYSTEM.
Double entry book keeping in accounting , is
a system of book keeping where every entry to
an accounts requires a corresponding and
opposite entry to a different account. The
double entry system has two equal and
corresponding sides know as debit and credit.
the dual (or) double – entry method,
requires recording each transactions twice,
reflecting both a credit and a debit. The single
–entry method involves recording transactions
for cash receipts and cash disbursements in
one of two journals.

7. PROBLEM:
1.An Indian company purchased goods from a USA Dealer an
January /1/2011 and the payment of $20000 fell due on April 30th
2011. the Indian company operate on a financial year basis (i ,e 1st
April to March 31st ) there would be an interim reporting date on
March 31,2011. Assumes the exchange rate prevailing on different
dates where as under.
 On transactions date the rate was $=41.00
On interim reporting date the rate was $=41.50
On the date of settlement the rate was $=42.00
a. The single transaction approach.
b. The double transaction approach.

8. SINGLE TRANSACTION APPROACH.
JOURNAL ENTREIS IN THE BOOKS OF INDIAN COM.
Date particulars L
F
Debit
amount
Credit
amount
1/1/2011 Purchase a/c Dr
To Accounts payable A/c
(Being credit purchase of $20000 @ Rs.41 recorded )
820000
820000
31/3/2011 Purchase A/c Dr
To Accounts payable A/c
(Being change in exchange rate by 0.50 recorded)
10000
10000

9. CONT.……..
30/4/2011 Inventories A/c Dr
To Accounts payable A/c
(Being additional change in exchange
rate of .50 Recorded)
(20000*0.50)
10000
10000
30/4/2011 Accounts payable A/c Dr
To Bank A/c
(Being Settlement made in Foreign
currency $20000@42 Recorded)
(20000*42)
840000
840000

10. NOTE:
In this approach initial transactions is recorded on
original i,e Jan 1/2011 with exchange rate of that date.
Hence transaction is recorded with exchange rate prevailing
of that date i,e @ Rs.41. an same journal additional amount of
different of Rs.10000. (.50$20000)is recorded on March
31/2011 by passing out the same journal entry and additional
amount of Rs.10000.the another difference of amount has
been recorded on the date of settlement and payment has also
been made on date of settlement by amount of Rs.840000.
($20000@Rs.42).

11. DUAL TRANSACTION APPROACH
JOURNAL ENTRIES IN THE BOOKS OF INDIAN COM.
Date particulars L
F
Debit
Amt.
Credit
Amt.
1/1/2011 Purchase A/c Dr
To Accounts payable A/c
(Being goods purchased on creditors for $20000@Rs.41
are Recorded)
(20000*41)
820000
820000
31/3/2011 Loss on Foreign Exchange A/c Dr
To Accounts payable A/c
(Being Effect on change in Exchange Rate (.50$20000)
recorded)
(20000*0.50)
10000
10000

12. CONT……..
30/4/2011 Loss on Foreign Exchange A Dr
Accounts payable A/c Dr
To Bank A/c
(Being Effect of Additional rate change and settlement
made by cheque for $20000@ Rs.42 Recorded)
(20000*42)
10000
830000
840000

13. CONCLUSION.
Single –entry systems are used in the
interest of simplicity. They are usually less
expensive to maintain than double entry systems
which require a significantly larger amount of
expertise. If a double –entry systems is needed, then
the services of a trained person are often required.

14. REFERENCES.
• https://www.yourarticlelibrary.com/accou
nting/accounting-for-currency-
transaction/accounting-treatment-of-
exchange-difference-financial-
analysis/67528