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Bank guarantees

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Yasaswi Gomes new

Finance

4592 Points Posted on 16 December 2023

Hi,

With just one post I wanted to demystify bank guarantee doubts globally

Bank Guarantee is not entered in the books of accounts. As per Part 3 to Schedule VI of the Companies Act, 1956, BG should be shown by way of discloser as Contingent Liabilited in Annual Report of the Company. Hence No entry is passed at all.

Txs

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Quick Summary

This discussion clarifies the accounting treatment of bank guarantees. It explains that bank guarantees are not entered into the books of accounts. Instead, they are disclosed as contingent liabilities in a company's annual report, as per the Companies Act 1956 and currently Schedule III of the Companies Act 2013.