Bank Guarantee

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Anil (Querist)
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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.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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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.

Amit Bajaj

Amit Bajaj (Expert)
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05 July 2008 Agree with Ramesh

Anil

Anil (Querist)
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05 July 2008 Thank you sir

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