What is the accounting treatment of L C? What is the accounting treatment of letter of credit busine

When a letter of credit is issued, there must be a deposit to be delivered to the issuing bank, and the finance department is bound to keep accounts, because the letter of credit will be opened to make external payments in the future, so it can be entries.

Unless your finance is very good at the settlement of the letter of credit and its terms, the company has provisions for the financial review of the letter of credit, otherwise the finance department will not participate in the review of the letter of credit; Because the letter of credit is not the entry of the actual money, no entry is required; If the finance department is not responsible for reviewing the letter of credit, there is no need to hand over the letter of credit to the finance department, but the salesman keeps it by himself, and handles the booking, delivery, production of documents, and submission of documents to the bank on time according to the requirements of the letter of credit; If your company wants to strengthen management, after receiving the letter of credit, you can register in the finance department, and timely remind or supervise or track the progress of the implementation of the letter of credit according to the shipment period, document delivery period and validity period specified in the letter of credit. After the execution of the letter of credit is completed, the finance department will do bookkeeping and entries after receiving the payment.

Accounting Treatment: Debit: Notes Receivable - Letter of Credit.

Credit: Accounts receivable.

When the bank discounts:

Borrow: Bank deposit.

Finance Expenses. Credit: Notes Receivable - Letter of Credit.

If it is paid to the domestic letter of credit of the ** merchant, the accounting treatment:

Debit: Accounts payable.

Credit: Notes Payable - Letter of Credit.

When repaying the L/C payment through the bank:

Debit: Notes payable - letter of credit.

Credit: Bank deposits.

Domestic Letters of Credit.

Accounting treatment: The enterprise applies to the bank to open a letter of credit to pay for the goods. According to the "Letter of Credit Authorization" stamped with the seal of the opening bank.

Receipt. Preparation of accounting entries.

Debit: Funds in other currencies.

Letter of credit deposits.

Loans: Bank deposits.

Payment of Letter of Credit Opening Fee:

Debit: Finance charge.

Loans: cash, bank deposits, etc.

The enterprise receives the L/C settlement voucher and the attached invoice documents from the ** businessman, and after checking that there are no errors, the accounting treatment shall be carried out

Debit: Material Purchases Tax Payable - VAT Payable (Input Tax.)

Credit: Funds in Other Currencies - Deposits in Letters of Credit.

When the enterprise receives the balance of the unused L/C deposit:

Debit: Bank deposit.

Credit: Funds in Other Currencies - Deposits in Letters of Credit.

1. What does letter of credit mean?

A letter of credit refers to a written certificate issued by a bank to an exporter at the request of the importer to guarantee the payment obligation of the goods. In the L/C, the bank authorizes the exporter to issue a bill of exchange not exceeding the prescribed amount for the payer in accordance with the conditions specified in the L/C, attach the shipping documents as required, and collect the loss at the designated place on time. In international** events, the buyer and the seller may distrust each other, and the buyer is worried that the seller is making an advance payment.

after the inability to deliver the goods in accordance with the contract; The seller was also concerned that the buyer would not pay after shipping or submitting shipping documents. Therefore, the two banks were required to act as guarantors for the buyer and the seller, collect and deliver the documents on behalf of the buyer, and replace the commercial credit with bank credit. The Gongling Sakura Divine Tool used by the bank in this activity is a letter of credit.

2. Accounting entries.

Accounting entries are also known as "bookkeeping formulas". This is called an "entry". According to the requirements of the principle of double-entry bookkeeping, list the accounts and their amounts corresponding to each economic transaction between the two parties. Before bookkeeping, pass the bookkeeping voucher.

The preparation of accounting entries can clearly reflect the classification of economic operations, which is conducive to ensuring the correctness of accounting records and facilitating post-event inspection. Each accounting entry mainly includes the Songji bookkeeping symbol, the related account name, the summary, and the amount. Accounting entries can be divided into simple entries and compound entries.

A simple entry is also known as a "single entry". Refers to the accounting entries that correspond to the debits of one account and the credits of another account. Compound entries are also known as "multiple entries".

Refers to the accounting entries corresponding to the debits of one account and the credits of multiple accounts, or the accounting entries of the credits of one account and the debits of multiple accounts. In order to ensure that the correspondence between accounting subjects is correct, clear and easy to understand the content of economic business, the accounting entries must strictly grasp the basic principles of one loan for multiple loans or one loan for multiple loans, and shall not lend more than one loan.

When applying to the bank to open a letter of credit, pay a deposit, and obtain a letter of credit, accounting entries:

Borrow: Other Monetary Funds - Letter of Credit Margin Deposit, Credit: Bank DepositWhen paying for the goods according to the "Notice of Letter of Credit for Incoming Documents" and relevant documents submitted by the issuing bank, the accounting entries are:

Borrow: inventory goods, etc., borrow: tax payable - VAT - input tax, credit: other monetary funds - letter of credit margin deposit,When the unused L/C deposit balance is transferred back to the opening bank, the accounting entries:

Borrow: Bank Deposits, Credit: Other Monetary Funds - L/C Margin Deposits.

Ledger accounts are categorized by the accounting element to which they belong:

1. Asset accounts: according to the liquidity of assets, they are divided into accounts reflecting current assets and accounts reflecting non-current assets.

2. Liabilities: According to the repayment period of liabilities, they are divided into accounts reflecting current liabilities and accounts reflecting long-term liabilities.

3. Common accounts: The characteristic of common accounts is that they need to define their nature from the direction where their closing balances are located.

4. Owner's equity account: according to the formation and nature of equity, it can be divided into accounts reflecting capital and accounts reflecting retained earnings.

5. Cost accounts: including "production cost", "labor cost", "manufacturing cost" and other subjects.

6. Profit and loss accounts: divided into income accounts and expense accounts. Revenue accounts include "main business income", "other business income", "investment income", "non-operating income" and other accounts.

Expense accounts include "Cost of Main Business", "Other Business Costs", "Business Tax and Surcharge", "Other Business Expenses", "Sales Expenses", "Administrative Expenses", "Financial Expenses", "Income Tax Expenses" and other accounts.

According to the economic content of the accounting subjects, the basic characteristics of the accounting elements are followed, and the increase and decrease of the changes of the accounting elements are classified and grouped, which clearly reflects the financial status and operating results of the enterprise.

Accounting Processing:

Debit: Notes receivable - letter of credit.

Credit: Accounts receivable.

When the bank discounts:

Borrow: Bank deposit.

Finance Expenses. Credit: Notes Receivable - Letter of Credit.

If it is paid to the domestic letter of credit of the ** merchant, the accounting treatment:

Debit: Accounts payable.

Credit: Notes Payable - Letter of Credit.

When repaying the L/C payment through the bank:

Debit: Notes payable - letter of credit.

Credit: Bank deposits.

1. Receive the letter of credit.

Borrow: Bills receivable - letter of credit.

Credit: Accounts receivable (or accounts receivable) in advance

2. L/C settlement.

Borrow: Bank deposit.

Credit: Notes Receivable - Letter of Credit.

The accounting treatment of domestic letters of credit includes:

The entry of the letter of credit received from the customer is, the borrowing file: the bill receivable group - letter of credit.

Credit: Accounts receivable.

When a business discounts to a bank:

Borrow: bank deposits, financial expenses, credit bridges or chaos: notes receivable - letter of credit.

If it is paid to the domestic letter of credit of the ** merchant, the accounting treatment:

Debit: Accounts payable.

Credit: Notes Payable - Letter of Credit.

When repaying the L/C payment through the bank:

Debit: Notes payable - letter of credit.

Credit: Bank deposits.