Asked by Shay D. Davis on May 22, 2024
Verified
What is the effect of fluctuations in exchange rates on accounts payable?
A) Deferred and amortized
B) Deferred to maturity
C) Recognized immediately in income
D) Recognized if losses, deferred if gains
Accounts Payable
amounts owed by a business to its suppliers or creditors for goods and services received but not yet paid for.
Exchange Rates
The rate at which one currency can be exchanged for another, influenced by market conditions, economic factors, and government policies.
Fluctuations
Variations or changes in value or level, often seen in financial markets, exchange rates, or pricing of commodities.
- Learn about the approaches for handling gains or losses from foreign currency transactions and their accounting treatment.
Verified Answer
JJ
Julenane JulesMay 28, 2024
Final Answer :
C
Explanation :
Fluctuations in exchange rates affect accounts payable immediately and are recognized in income. This is because accounts payable represent amounts owed to foreign creditors which will become due in the future, meaning that any changes in exchange rates will impact the amount that will be paid. Therefore, any gains or losses resulting from fluctuations in exchange rates are recognized immediately in income. Choices A, B, and D do not accurately reflect the effect of fluctuations in exchange rates on accounts payable.
Learning Objectives
- Learn about the approaches for handling gains or losses from foreign currency transactions and their accounting treatment.