When the exchange rate for a foreign currency increases between a purchase and a payment -
A)the payment amount is set by the exchange rate at the time of the purchase
B)the difference between the two rates is debited to the asset or expense account for the purchase
C)the difference between the two rates is credited to the linked expense account for tracking exchange rate differences
D)the difference between the two rates is debited to the linked expense account for tracking exchange rate differences

Question

Quizplus · Accepted Answer

If the exchange rate for a foreign currency increases between a purchase and a payment, the difference between the two rates is debited to the linked expense account for tracking exchange rate differences. This is because the cost of the purchase has increased due to the change in exchange rates, and this cost should be reflected in the expense account. Therefore, option D is the best choice.

When the Exchange Rate for a Foreign Currency Increases Between