how to account for letter of credit both in case of export and import in the books of company
3 Replies
Rajesh
(Partner)
(26 Points)
Replied 14 May 2010
letter of credit is an intent to import or export and it is not a financial transaction...so no question of entering into the books
Arvind Khemka
(practicing CA)
(210 Points)
Replied 15 May 2010
@ rajesh: but suppose sa company imports goods and issues letter for credit gainst it, doesnt the company becomes liable for that and the letter of credit issed by bank has the be in the lliability side of the company
Vinay
(Consultancy)
(39 Points)
Replied 17 May 2010
Letter of credit is not a financial transaction to be booked in books of accounts. It is a transaction between the l/c opener and the bank. Only booking that can be done is for the bank charges or margins that are given but as far as the payment is concerned entry will be made only when the amount is remitted from bank as per the terms of lc.
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