Question

Foreign exchange impact on the income statement

Answer 1

If the any organization have some foreign transaction and due to this if there is some transaction is pending in balance sheet as on closing than there income statement will effect with any changes in foreign transaction.

Following are the some transactions will affect the income statement,

1. Company have some borrowing in foreign exchange
2. Account payable in foreign exchange
3. Some lease or patent payable in foreign exchange
4. Account receivable in Foreign exchange
5. Loans and advances in foreign exchange
6. Assets purchase or sold payable receivable in foreign exchange
7. Subsidiary or any unit at outside of country.

Foreign currency are fluctuating the daily , so when they fluctuate than our receivable or payable also fluctuates and difference of this is become revenue or losses. If the fluctuation is positive for organization than we show gain from foreign exchange fluctuation and if the fluctuation have negative impact than we have to book the losses for the same.