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Bank Guarantee

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(Querist)
05 July 2008 Please let me know:

When Bank Guarantee is given on companies' behalf

1) what accounting entry needs to be passed?

2)What disclosures are to be made in notes to accounts?

Please answer questionwise.Thanks.
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CA RAMESH KUMAR AHUJA

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CA RAMESH KUMAR AHUJA (Expert)
05 July 2008 Bank Guarantee charges are to be written off to Profit and Loss account on mercantile basis. The amount of expenses paid for a period falling in the next accounting year may be treated as Prepaid Expenses.
Bank Guarantee is a Non funded facility and the same may be invoked on the happening of certain event, as such, it is contingent in nature. A note should appear under the head 'Contingent Liabilities' giving the details and the maximum amount involved.
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Amit Bajaj

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Amit Bajaj (Expert)
05 July 2008 Agree with Ramesh
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Anil

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Anil (Querist)
05 July 2008 Thank you sir
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