01-03-2009, 07:14 PM
Dear,
Post your question with some details or some dummy figures at least if you want to have a refined answer. Also elaborate whether or not letter of credit has ben used by buyer.
Normally such terms are used for import export trading because locally instead of FOB , C&F or CIF, the terms used are ex-store, ex-factory, premises delivery etc.
As a gneral principle the following entry has to be recorded
.........Letter of credit account (DEBITED)
.........All refundable taxes paid on imports (DEBITED)
.................................Bank account (CREDITED)
Every sort of payments made in connection with such procurement against one L/C are recorded as per above entry. If some payments are made after availing credit time, the payment etry could be routed from Creditors account as well.
......... Inventories / Stores and spares / raw material (DEBIT)
...................................Letter of credit account (CREDIT)
This entry is made to transfer the L/C account to proper account head after complete valuation on the basis of all cost components.
The above two entries have to be recorded invariablly. Now if the related costs including freight, insurance and carriage etc are paid by the buyer, these will also make part of the L/C cost. If these are paid by seller, there arises no question.
Regards,
KAMRAN.
Post your question with some details or some dummy figures at least if you want to have a refined answer. Also elaborate whether or not letter of credit has ben used by buyer.
Normally such terms are used for import export trading because locally instead of FOB , C&F or CIF, the terms used are ex-store, ex-factory, premises delivery etc.
As a gneral principle the following entry has to be recorded
.........Letter of credit account (DEBITED)
.........All refundable taxes paid on imports (DEBITED)
.................................Bank account (CREDITED)
Every sort of payments made in connection with such procurement against one L/C are recorded as per above entry. If some payments are made after availing credit time, the payment etry could be routed from Creditors account as well.
......... Inventories / Stores and spares / raw material (DEBIT)
...................................Letter of credit account (CREDIT)
This entry is made to transfer the L/C account to proper account head after complete valuation on the basis of all cost components.
The above two entries have to be recorded invariablly. Now if the related costs including freight, insurance and carriage etc are paid by the buyer, these will also make part of the L/C cost. If these are paid by seller, there arises no question.
Regards,
KAMRAN.
