We are a project based organization located in Country "A" , and implementing a project located in country "B". The contract is in USD and all invoices are received and paid in USD for execution of the project in country "B", and the organization maintains a Local currency account. The Accounting and Reporting currency of the organization is USD. The finance ministry of country "B" makes VAT Refunds into the local currency account of the organization maintained in country B. The organization establishes an Exchange Rate at the beginning of every month, and this is applied for accounting and reporting purposes. The finance ministry will use their bank rate and refund the VAT amount into our local currency account, resulting in exchange gain / loss.
in our situation all VAT refunds has resulted in Exchange gains.I would like if some one could please let me know the Debit and credit entries for VAT, VAT Receivable and Exchange Gain accounts.
Thank you for a speedy response 27th December 2017 From Sri Lanka, Colombo