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Bank guarantee accounting treatment

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Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2011 a person has taken financial bank guarantee which he has given for taking some contracts.

what will be the accounting treatment of it.

CA. Nitin Agrawal

CA. Nitin Agrawal (Expert)
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21 August 2011 1. Bank Guarantee charges are to be written
off to Profit and Loss account on
mercantile basis.

2. The amount of expenses paid for a period
falling in the next accounting year may
be treated as Prepaid Expenses.

3. 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.

Hope query resolved.
Now Cheers

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2011 tanks sir,

I have one more query in this issue

Person A taken a bank guarantee on FDR / property of person B for giving it to a govt. department.

What will be accounting treatment in this case.

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