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Letter of Credit and Financial Statement - Printable Version

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Letter of Credit and Financial Statement - A380 - 12-10-2006

L/C Usance, L/C at sight, L/C acceptance, L/C...etc
Can anybody explain these terms. The bank confirmation at the year end shows balances in respect of these headings of L/C. In the Financial Statement balance of L/C Acceptance is presented as liability and the rest of the L/C confirmation are shown as commitments in the FS. What is the criteria for the disclosure of L/C balances. Can anybody give the answer?


- Abdur.Rehman - 12-13-2006

L/C usance gives u time. say usance LC of 365 days normally. where money is payable within one year of maturity date of LC.
L/C at sight payable at the time of maturity
LC is a letter of credit, given by our bank to the suppliers bank. Our bank makes payment to the bank of the supplier, and on delivery of goods the bank takes the documents of the goods and gives us the documents when we pay the due money to the bank.
There is no separate amount shown as LC payable. It is actually our payable to the supplier against the goods, and we book the payable when the goods are delivered. But as LC is a sort of contingent liability, so v give disclosure of all LCs opened by us with the bank.


- A380 - 12-14-2006

And what about L/C acceptance. Which is shown as a liability.


- Abdur.Rehman - 12-18-2006

Acceptance LC is LC that becomes payable on the acceptance of goods i.e. when the goods are delivered and accepted...