08-21-2009, 03:42 PM
AoA
Let me elaborate LC and LG further as
<u>Transaction-related Contingent Liabilities</u>
These normaly include performance bonds, bid bonds, warranties, advance payment guarantees, shipping guarantees and standby letters of credit related to particular transactions issued in favour of Government, banks etc.
<u>Trade-related Contingent Liabilities</u>
This ususally include LCs (Both sight and usance) and accepatances.
LCs and LGs are off balance sheet items and disclosed in contingences and commitments portion of balance sheet and hence no double entry required. However you will record LC margin and Guarantee margin as liability in books of bank.
Regards,
Nabeel Anwer
Let me elaborate LC and LG further as
<u>Transaction-related Contingent Liabilities</u>
These normaly include performance bonds, bid bonds, warranties, advance payment guarantees, shipping guarantees and standby letters of credit related to particular transactions issued in favour of Government, banks etc.
<u>Trade-related Contingent Liabilities</u>
This ususally include LCs (Both sight and usance) and accepatances.
LCs and LGs are off balance sheet items and disclosed in contingences and commitments portion of balance sheet and hence no double entry required. However you will record LC margin and Guarantee margin as liability in books of bank.
Regards,
Nabeel Anwer
