bank guarantee

under "LOANS & ADVANCES"

journal entry for bank guarantee with eg

Company wanted to apply for a Government Contract with Railway Mininstry

where company would sell goods to Government of Rs 100 lacs

To secure contract,Bank Guarantee of 40.00,000 was required.

Company took this  Bank Guarantee from PNB Bank of Rs 4000000 for 3 months

Bank took 2 % Commission p.a. and Asked for 25% Margin money in the form of a FD

Interest earned on FD was 8% p.a

Government Contract completed and money received from government 

Bank Guarantee revoked

FD Returned including Interest on FD

Pass Entries in books of company