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Entries for recording letter of credit

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priya (Querist)
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25 May 2013 Sirs,
I have been appointed as a purchase coordinator in a company which mainly imports its major goods on payment basis. And now we have been guided to open LC for our purchases.

Query is, i need to know the exact accounting entries that should be passed in my books to record the same and with regard to settlement to issuing bank too.

Thanks in Advance
Priya

Rupesh Jain

Rupesh Jain (Expert)
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19 June 2013 for import lc pls contact your bank
due to every bank have diff-2 requirment.

when you open the LC bank charges charge for opening charges of LC.
that is bank charges. if you import machinery then you capitaliz this

when lc payment debit the party
credit the lc payable a/.c

when bank recover lc amount

then you debit the LC Payable a/c
to bank a/c
and also intt. charges by bank
if import is machinery then capitalize the intt.
other wise charg to P/l a/c

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