Treatment of Bank Guarantee

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This discussion clarifies the accounting treatment for a bank guarantee accepted by an organisation in lieu of a vendor's security deposit. While no direct accounting entry is made for the guarantee itself, it should be disclosed in the notes to the financial statements. The consensus is that it should be treated as a contingent asset.

Bapun Dasgupta

Bapun Dasgupta (Querist)
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02 August 2024 Our organisation has accepted a Bank Guarantee from one of it's vendors in lieu of Security Deposit payable by the vendor to our organisation for work order related to services rendered to our organisation. Kindly let me know the accounting treatment and consequent disclosure in the financial statements. We are not a Company, it is an organisation exempt u/s. 10(23C)(iv) of the Income Tax Act, 1961.

Regards.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 August 2024 No accounting treatment can be given for the bank guarantee accepted.
It can be disclosed in the financial statements under notes on accounts.

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Bapun Dasgupta

Bapun Dasgupta (Querist)
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03 August 2024 To disclose as "Contingent Asset" or Liability" Sir ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 August 2024 It's contingent asset.

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Bapun Dasgupta

Bapun Dasgupta (Querist)
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03 August 2024 Thank you very much Sir. My sincere regards.

CA R SEETHARAMAN