Exchange gains and losses on accounts receivable/payable that are denominated in a foreign currency are _______.
A)recognized in the periods in which exchange rates change.
B)deferred and reported upon settlement.
C)reported as adjustments to the transaction prices.
D)reported as equity adjustments from translation.

Question

Quizplus · Accepted Answer

Exchange gains and losses on accounts receivable/payable that are denominated in a foreign currency are recognized in the periods in which exchange rates change. This is in accordance with the accrual accounting principle, which recognizes revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. Therefore, gains and losses are recognized in the income statement in the period in which they occur.

Exchange Gains and Losses on Accounts Receivable/payable That Are Denominated