Explanation Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities. Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses. Prepare journal entry for the given transaction as follows: Journal Date Account Title and Explanation Post Debit Credit Ref. ($) ($) December 16, 2015 Accounts receivable 24,791 Sale (1) 24,791 (To record the sales revenue received on account) Table (1) Accounts receivable is an asset account and it increases the value of asset by $24,791. Therefore, debit accounts receivable account for $24,791. Sales are a revenue account, and it increases the value of owner’s equity by $24,791. Therefore, credit the sales account for $24,791. Working note: Calculate the value of sales on March 1. Sales = Number of pounds × Exchange rate on December 16 =17,000 × $1 .4583 =$24,791 (1) Date Account Title and Explanation Post Debit Credit Ref. ($) ($) December 31, 2015 Foreign exchange loss (3) 342 Accounts receivable 342 (To record loss on foreign exchange) Table (2) Foreign exchange loss is a revenue account and it decreases the value of owner’s equity by $342. Hence, debit the foreign exchange loss account with $342. Accounts receivable is an asset account and it decreases the value of asset by $342. Therefore, credit accounts receivable account for $342. Working note: Calculate the value of cash received on March 1. Cash recieved = Number of pounds × Exchange rate on December 31 =17,000 × $1 .4382 =$24,449 (2) Calculate the foreign exchange gain

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ISBN: 9781259693168

Author: Wild

Publisher: MCG

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Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the …

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Chapter C, Problem 15E

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Prepare journal entries for the given foreign exchange transactions.

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Chapter C, Problem 14E

Chapter C, Problem 16E

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FINANCIAL ACCOUNTING FUND. W/CONNECT

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