Accounting treatment of bank guarantee
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 October 2012
How do we recognise bank guarantee in books and proper accounting treatment about this ,when bank guarantee issue to bank guarantee settelment.
Amol S Joglekar
(Expert)
17 October 2012
The commission paid on BG (BAnk Guarantee) shall be debited to Bank charges / Guarantee commission (Depending upon the materiality) When bank guarantee is invoked, the concerned banker pays the amount to your creditor and the amount should appear as loan in your books.
CA. Subhash Dangi
(Expert)
17 October 2012
Bank Guarantee is non fund based limit sanctioned by banks and other financial institutions.
BG is Contingent Liability and shown only in Notes to the Accounts.
There is no entry required when no collateral or security is given.
However, entry is required when any security by way of Cash margin like security deposit, FD etc and that can be shown under current assets in Balance sheet as Margin money on BG.
When BG is settled or expired, entry for margin money should be reversed.
BG is Contingent Liability and shown only in Notes to the Accounts.
There is no entry required when no collateral or security is given.
However, entry is required when any security by way of Cash margin like security deposit, FD etc and that can be shown under current assets in Balance sheet as Margin money on BG.
When BG is settled or expired, entry for margin money should be reversed.
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