Exam (elaborations) FINANCIAL ACCOUNTING

,  Things to know for a forex question:
 Transaction Date – This is when transaction is recognized/ Date
you Journal entry begins. (Purchase of an asset whether on cash
or credit- DR Asset (SOFP), CR Bank (SOFP) (if purchase is on
cash)/ CR Foreign Creditor (SOFP) (if purchase in on credit) or
Sale of an Asset you apply the same principles if sale was in cash
(DR Bank (SOFP) CR Revenue(P/L)) if sale was on credit (DR
Foreign Debtor (SOFP) CR Revenue(P/L)


 Settlement date- Date at which we pay the creditors for the
acquisition of an asset on credit, be careful this date could be after
the Reporting date (Financial Year end), if so, you have to
recognize forex gains/losses.


 Reporting date- Financial Year end of the entity.
 Forward Rate – Is the exchange rate for the exchange of
currencies at a future agreed date basically 1$=R14 for example.
 Spot rate- the exchange rate for immediate delivery


Key Terms to identify the Transaction Date (the TD is the most crucial
because if you get it wrong, all your journal entries or workings are
incorrect):
1. FOB (C.I.F follows the same procedure as FOB) – Transaction
date begins when goods are loaded onto the ship at the port of
shipment (You will be told when are the goods loaded into the ship
in China for example)
2. DAT (D.D.P follows the same procedure as DAT)– Transaction
date begins when goods are offloaded at the named destination
(You will be told when did the goods arrive in South Africa, that is
the date where you will begin your journal entries)

Exchange losses and gains: Both are recognized in P/L, Losses
occur on the DR while Gains occur on the CR