B Com Exam > B Com Questions > How should cash flows in foreign currency be ...
Start Learning for Free
How should cash flows in foreign currency be recorded in a cash flow statement?
- a)By applying the exchange rate at the beginning of the period.
- b)By applying the exchange rate at the end of the period.
- c)By applying an approximate exchange rate.
- d)By excluding them from the cash flow statement.
Correct answer is option 'B'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
How should cash flows in foreign currency be recorded in a cash flow s...
Answer:
Foreign currency transactions can have a significant impact on a company's cash flows, especially for multinational corporations. When preparing a cash flow statement, it is important to accurately record the cash flows in foreign currency to provide an accurate representation of the company's financial position. The correct method for recording cash flows in foreign currency is by applying the exchange rate at the end of the period, which is option 'B'.
Reasoning:
The reason for applying the exchange rate at the end of the period is to ensure that the cash flows are recorded at their actual value. Exchange rates fluctuate over time, and by using the exchange rate at the end of the period, the cash flows are recorded at the most current and accurate rate.
Explanation:
When a company engages in transactions denominated in a foreign currency, such as sales or purchases, the cash flows from these transactions need to be recorded in the cash flow statement. The cash flows should be reported in the functional currency of the company, which is typically the currency in which the company primarily operates.
To determine the value of the foreign currency cash flows in the functional currency, the exchange rate at the end of the period should be used. This is because the exchange rate at the end of the period reflects the most current market rate and provides a more accurate representation of the cash flows.
Using the exchange rate at the beginning of the period or an approximate exchange rate could result in misstating the cash flows and distorting the financial position of the company. The beginning-of-period exchange rate may not reflect the actual value of the cash flows at the end of the period due to exchange rate fluctuations. An approximate exchange rate may not accurately represent the market rate and could result in an incorrect valuation of the cash flows.
Therefore, when preparing a cash flow statement, it is important to apply the exchange rate at the end of the period to accurately record the cash flows in foreign currency. This ensures that the financial statements provide a true and fair view of the company's financial position.
Foreign currency transactions can have a significant impact on a company's cash flows, especially for multinational corporations. When preparing a cash flow statement, it is important to accurately record the cash flows in foreign currency to provide an accurate representation of the company's financial position. The correct method for recording cash flows in foreign currency is by applying the exchange rate at the end of the period, which is option 'B'.
Reasoning:
The reason for applying the exchange rate at the end of the period is to ensure that the cash flows are recorded at their actual value. Exchange rates fluctuate over time, and by using the exchange rate at the end of the period, the cash flows are recorded at the most current and accurate rate.
Explanation:
When a company engages in transactions denominated in a foreign currency, such as sales or purchases, the cash flows from these transactions need to be recorded in the cash flow statement. The cash flows should be reported in the functional currency of the company, which is typically the currency in which the company primarily operates.
To determine the value of the foreign currency cash flows in the functional currency, the exchange rate at the end of the period should be used. This is because the exchange rate at the end of the period reflects the most current market rate and provides a more accurate representation of the cash flows.
Using the exchange rate at the beginning of the period or an approximate exchange rate could result in misstating the cash flows and distorting the financial position of the company. The beginning-of-period exchange rate may not reflect the actual value of the cash flows at the end of the period due to exchange rate fluctuations. An approximate exchange rate may not accurately represent the market rate and could result in an incorrect valuation of the cash flows.
Therefore, when preparing a cash flow statement, it is important to apply the exchange rate at the end of the period to accurately record the cash flows in foreign currency. This ensures that the financial statements provide a true and fair view of the company's financial position.
Free Test
FREE
| Start Free Test |
Community Answer
How should cash flows in foreign currency be recorded in a cash flow s...
Cash flows arising from transactions in a foreign currency should be recorded in an enterprise's reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and foreign currency at the end of the period. This ensures that the cash flows are reported at the most accurate exchange rate. Unrealized gains and losses arising from changes in foreign exchange rates are not considered as cash flows.
|
Explore Courses for B Com exam
|
|
Similar B Com Doubts
How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer?
Question Description
How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer?.
How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer?.
Solutions for How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for B Com.
Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free.
Here you can find the meaning of How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer?, a detailed solution for How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice How should cash flows in foreign currency be recorded in a cash flow statement?a)By applying the exchange rate at the beginning of the period.b)By applying the exchange rate at the end of the period.c)By applying an approximate exchange rate.d)By excluding them from the cash flow statement.Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice B Com tests.
|
|
Explore Courses for B Com exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup