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L/Cs and L/Gs treatment for receivables
03-18-2009, 04:18 PM
Post: #1
L/Cs and L/Gs treatment for receivables
Dear All,

I am working in Cement industry in one of the Gulf countries and currently we are facing the following problems with respect to our receivables.
From all of our credit customers we receive L/Cs and L/Gs.
• What should be the treatment of L/Cs and L/Gs in the books of account?
• In case we receive “Post dated check” from the customers, can we reduce our receivables at this point of time? If yes, how can it be executed?
• In case of L/C, when the Bank issues “Acceptance Advice” (an irrevocable commitment) that this will be the maturity date of our L/C, but sometimes it takes one or two days for the money to be actually credited in the bank, can we reduce our receivables as at the maturity date of the L/C and not waiting for the money to be actually credited in bank (on the basis of bank acceptance advice).

Kindly advise in light of “International Accounting standards” (with reference).

Muhammad Ihsan
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03-18-2009, 06:20 PM
Post: #2
 
1- What should be the treatment of L/Cs and L/Gs in the books of account?

L/c's and L/Gs would be treated as commitments without transaction in the books of accounts. Letters of credits / guarantees forms level of guarantees.

2- In case we receive “Post dated check” from the customers, can we reduce our receivables at this point of time?
One can not reduce one's receiveables /payable on issuance of "post dated check", It will remain receivables / payable till the date mentioned on the check.

2- In case of L/C, when the Bank issues “Acceptance Advice” (an irrevocable commitment) that this will be the maturity date of our L/C, but sometimes it takes one or two days for the money to be actually credited in the bank, can we reduce our receivables as at the maturity date of the L/C and not waiting for the money to be actually credited in bank (on the basis of bank acceptance advice).


can not reduce receivables as at the maturity date of the L/C and wait for the money to be actually credited in bank i.e reduce on the basis of credit advice).


See "Occurance" and "Revenue Recognition"
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