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Booking and disclosure of contingent liability

Others 392 views 4 replies

A work order of Rs. 1,75,20,000/- has been issued by the company to the vendor on 1 February, 2019. Against this, Bank Guarantee of Rs. 17,52,000/- has been received from the vendor on 4 February, 2019. Liability of Rs. 34,45,600/- has been booked as S/Creditors For Accrued Expenses for the accounts closing for 31 March, 2019. 

How should the accounting and disclosure of "Bank Guarantee" of Rs. 17,52,000/- (as above) be made in the financial statements including notes to accounts for the year ended 31 March, 23019 ? Also, please indicate the amount of Bank Guarantee to be disclosed in the financial statements including notes to accounts.  

Regards.

Replies (4)
Only disclosures for contingent liabilities are given in notes. However if it is certain that guarantee is going to be invoked then provision should be provided in p&l

Thank you Sir.

if you got the bank guarantee from vendor, you should not show it as your contingent liability. it is contingent liability in vendor's books.

Thank you Sir. This was exactly what I wanted to know. We have received the B.G. from Citibank N.A. on behalf of the Vendor. 


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