Foreign exchange transactions
Discuss how foreign exchange transactions between the international banks are settled?
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Interbank market is the system of correspondent banking relationships, with large commercial banks sustaining the demand deposit accounts with each other, known as correspondent bank accounts. Correspondent bank account system permits for the efficient functioning of foreign exchange market. Considering the example of how system of the correspondent bank accounts services the international foreign exchange transactions, consider the U.S. importer who is willing in order to buy the merchandise invoiced within the guilders from a Dutch exporter. U.S. importer may contact his bank and query about exchange rate. If U.S. importer accepts offered exchange rate, bank may debit the U.S. importer’s account for buying Dutch guilders. Bank may instruct its correspondent bank in Netherlands to debit its correspondent bank account with the appropriate amount of guilders and to credit Dutch exporter’s bank account. Importer’s bank may then debit its books to offset debit of the U.S. importer’s account, reflecting the decline in its correspondent bank account balance.
Q : CASH AND ACCRUAL BASIS OF ACCOUNTING Using the data below,prepare abbreviated income statements for the year 2003 and 2004 on cash basis. Cash receipts from sales: 2003 2004 2005 on 2003 sales $295,000 $160,000 $30,000 On 2004 sales 0 355,000 90,000 On 2005
Using the data below,prepare abbreviated income statements for the year 2003 and 2004 on cash basis. Cash receipts from sales: 2003 2004 2005 on 2003 sales $295,000 $160,000 $30,000 On 2004 sales 0 355,000 90,000 On 2005
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