Journal entry of bg encashment.

This query is : Resolved

suresh (Querist)
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20 March 2015 Respected Madam/Sir,

Kindly provide Journal entry of Bank Guarantee encashment in the books of both parties.

Thanks.

Kishanlal Paliwal

Kishanlal Paliwal (Expert)
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21 March 2015 Bank guarantee is not a transaction, it is a notable item.

However, following entries may be passed in the books to track it;

In the buyers book:

Sundry creditors contra (BG) A/c Dr.
Bank Guarantee given A/c Cr.

In the suppliers book:

Bank Guarantee received A/c Dr.
Sundry debtors contra (BG) A/c Cr.

Bank charges paid are to be treated as normal bank expenses. Once the BG are cancelled, the reversal entries required to be passed. In the balance sheet the information to be provided into "notes on accounts".

Regards
K.L.Paliwal