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accounting effect of BG and LC
Dear Sir, I want to know that whether Bank Guarantees n Letter of Credits are considered as Contigent liabilities for a company??? If no, then what is the reason of that??
Replies (1)
Generally banker is providing Guarantee on behalf of his customers. so it is called Bank Guarantee. In this case banker has secondary obligation. it is considered as contingent liability as per baner's view.
customer view:
company has done any credit transaction. for that company has the primary obligation to settle the liability. so it is not a contingent liability. it is actual liability.
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