journal entry of LC

If you sold goods to party

Entry is

Party A/c      DR.

   TO sales

after that you have recd money from bank against letter of credit

then entry is

bank a/c       dr.

    to party

there is no matter co. recd money from party directly/indirectly through letter of credit, Entry will be same

If any Comment ,plz reply

did bank charges any amount for giving amt. against letter of credit. I am little confused about the concept of letter of credit. plz explain it .

Enter the following

Letter of credit(LC) Commission expense  in Debit $XXX (amt)
Purchases / Stock / Inventory in  Debit -$XXX
Vendor  in Credit - $XXX
Bank in  Credit -$XXX
LC margin with the Bank - ( Advances) - Credit -$ XXX

Yes bhuvan, divya is absolutely right. Doesnt matter whether is payment is recd against LC or directly.

Entry will remain same.

@ Numia n krishnamoorthi, LC margin money will cum in the pic only when the company issues an LC for import.