Letter of credit- the bank's obligation, provided at the request of the client, to pay to a third party when the payee provides the bank executing the letter of credit with the documents stipulated by the terms of the letter of credit. The client company, on behalf of which a letter of credit is opened, is usually called the payer under the letter of credit, or the applicant. The recipient of payment under a letter of credit is called the beneficiary. At the same time, the bank's obligation is independent of the obligations of the parties under the main contract, which provides for a letter of credit form of settlement between the supplier and the buyer. Thus, the bank acts as a guarantor between them.

Suppose a seller and a buyer enter into a deal. They are dealing with each other for the first time and are not ready to work on an advance payment or on a preliminary basis. Then the buyer applies to the bank with an application to open a letter of credit for the amount due to the seller for the shipped goods. Evidence of the fulfillment of the contract by the seller may be, for example, documents on the shipment of goods. As soon as the subject of the transaction is transferred to the buyer or an independent carrier, the seller sends the required documents to the bank executing in accordance with the terms of the letter of credit. The buyer's bank makes payment under the letter of credit in accordance with the instructions received from the nominated bank. Letter of credit operations involve a number of bank commissions paid in accordance with the terms of the letter of credit. Usually, the commission for opening a letter of credit is paid by the buyer.

Letters of credit allow you to guarantee payment to the supplier, while, as a rule, funds are not diverted from circulation.

The letter of credit form of payment is used both in foreign trade, as well as in the internal. Letters of credit used in international settlements are subject to the Uniform Customs and Practice for Documentary Letters of Credit, publication of the International Chamber of Commerce No. 600, as amended in 2007 (hereinafter referred to as UOP 600).

Letters of credit used for domestic settlements are subject to the Regulation of the Central Bank of the Russian Federation No. Money» No. 383-P of 06/19/2012.

Domestic letters of credit can be classified into the following groups:

Revocable and irrevocable;

Confirmed and unconfirmed;

Covered (deposited) and guaranteed.

All letters of credit, in accordance with UOP 600, are currently irrevocable. Coverage in international letters of credit is rarely used - only in the case of confirmation of a letter of credit opened by an issuing bank, for which limits are not set by the confirming bank.

A confirmed letter of credit is one under which, in addition to the obligation of the issuing bank, another bank undertakes an additional obligation to make a payment in favor of the beneficiary upon presentation by the latter of documents that fully comply with the terms of the letter of credit, regardless of whether the funds will be transferred to it or not. If there is no obligation of another bank, then the letter of credit is unconfirmed.

Covered (deposited) - a letter of credit, the amount of which in in full is transferred to the coverage account in the beneficiary's bank at the expense of the payer or at the expense of the loan provided.

Uncovered (guaranteed) - a letter of credit, upon opening which the issuing bank does not transfer funds to a letter of credit account in the beneficiary's bank, but gives him the right to write off the required amount within the amount of the letter of credit from his correspondent account or agrees to pay in another way. Usually big banks are open to each other credit lines, so in developed countries virtually all letters of credit are uncovered.

In addition, letters of credit are of the following types.

Letter of credit with a red clause - a letter of credit under which the supplier receives a certain amount in the form of an advance payment before shipping or other documents evidencing the performance of obligations are provided. In this case, payment is made against the submission by the beneficiary of the documents stipulated by the terms of the letter of credit. The name comes from the time when such an important clause was highlighted in red ink in a document. Of course, in our time, almost all letters of credit are issued and confirmed electronically.

Revolving - a letter of credit opened for a part of the amount of payments and automatically renewed as payments are made for the next batch of goods. Opens with regular deliveries and payments.

Transferable (transferable) - a letter of credit that provides for the possibility of transferring part of the letter of credit in favor of other beneficiaries.

A standby letter of credit, the so-called stand-by, is a form of bank guarantee in the form of a letter of credit, used where banks are prohibited from issuing guarantees (for example, in the USA). Payment to the exporter is made in the event that the importer refuses to make payment under the contract and presents to the executing bank the documents that meet the terms of the standby letter of credit. That is, such a letter of credit serves to ensure greater security for the supplier.

According to the method of execution, letters of credit are divided into letters of credit with payment on presentation of documents (by payment at sight), with deferred payment and with acceptance of drafts.

A letter of credit is a very reliable method by which the supplier of a service or product and its recipient can pay each other. Such letters of credit are divided into several varieties. Today we will talk about what an irrevocable letter of credit is and what features it has. An irrevocable letter of credit is when it is impossible to cancel it without the consent of the recipient.

Brief terminology

If we consider how individuals, firms or individuals with legal entities become partners, one can ask such an important question - how not to lose your money when making a deal with a new partner? Any company or citizen would like to insure against a fraudulent partner, especially if a lot of money is involved in the transaction.

Letter of credit protects the deal

In such a situation, the most optimal option is to use the form of calculations we are considering. This is a very comfortable and safe settlement form. Although not everyone in our country uses it, this is due solely to the fact that not everyone knows the features of the implementation of these transactions, their pros and cons. Next, we will tell you about what a letter of credit is and what nuances it has.

If to speak plain language, this is a settlement form in which not only two parties (buyer and seller) interact, but also financial institutions acting as guarantors at the time of transactions. It is for this reason that the transaction is safe - both parties are well protected from fraud.

What are letters of credit

Before signing an agreement, it is important to study what the features of a particular letter of credit are.

There are the following varieties:

1. Covered deposited irrevocable letter of credit. In this case, the issuing bank is obliged to credit funds at the expense of the payer or the loan issued. There is a transfer of money for the entire time interval of the agreement.
2. Uncovered (guaranteed). The issuing credit institution issues an instruction to the executing financial organization- withdraw money from the account under the current agreement.
3. Revocable. A revocable letter of credit is when the issuer has the ability to change or cancel letters of credit without notifying the supplier. It is worth noting the following point: this financial institution has no obligations to the recipient of finance. The executing credit institutions pay the required indicators - if there is no signal that the transaction has been cancelled.
4. irrevocable. A credit institution cannot change or cancel the form of payment, unless the other party - the recipient - agrees to this.
5. Non-acceptance.
6. Documentary.

What are irrevocable letters of credit

It is worth saying that the most famous forms of payment in Russia are irrevocable. Their main advantage is precisely that they cannot be changed or canceled unless the party accepting the funds agrees. It automatically goes into the category of irrevocable when other information is not recorded in the document.

A financial institution that has opened a letter of credit must carry out transactions towards the supplier within a specially allotted time period. The latter is prescribed in the agreement at the time of the provision of documentation.

There are the following types of irrevocable letters of credit:

1. Confirmed.
2. Unconfirmed.

Now about each of them in more detail.

Letter of credit scheme

In the first case, thanks to the letter of credit, the security of payments is increased, since now not only the credit institution that opened it is responsible, but also the partner banking organization that confirmed it. In other words, he takes on all the obligations to pay for documentation and agreements if the second credit institution refuses to conduct transactions.

In the second case, the issuing credit institution is responsible for everything. The seller's banking organization is engaged in the performance of an exclusively intermediary role.

What are the nuances of calculations in this way

The advising credit institution does not have the opportunity to confirm the form of payment of one of the parties to the agreement. If there is no confirmation from the very beginning in the terms of the transaction, it can be made in the same way as other additions to the letter of credit.

In such a situation, it would be better if the distributor makes sure that confirmation is available - and in the required amount. Let's say you need to have a document in which the credit institution announces the addition of a confirmation to the contract and says that it will pay all expenses and claims for payment of the amount indicated in the agreement.

But in such a situation, the acceptance by the seller of a letter of credit is a risk that requires the provision of the following documents:

1. inspection certificates.
2. Evidence of receipt of goods. It must be signed by the buyer.
3. Forwarder's certificates of receipt of goods.

Based on the provisions of practice, the seller of any product is obliged to check as soon as possible whether any other documentation is provided for in the form of payment, except for that over which he has personal control.

How the calculation works - what you need to understand

Now we will give an example and study how the work of the irrevocable form of settlement is carried out in life. An example is this: you need to buy equipment that is sold only in Western countries - for example, in a country like Romania. An agreement is signed with the supplier. The next steps are:

1. An application is written to open a letter of credit from the buyer of the service to the credit institution - the issuer. A notification about this is sent to the advising financial institution.
2. The money reflected in the agreement is transferred to the recipient's account (this can be his personal savings or a loan received). If the letter of credit is confirmed, the seller wants to receive guarantees from a third financial institution, and sends the money to her - only this institution will have to provide guarantees for the payment of funds to the one who delivers the goods.
3. A notification is sent that a letter of credit has been opened. Further, all necessary equipment is supplied.
4. Documents are sent from the seller to the financial institution. Then they are transferred to a credit institution acting as an issuer. The last stage is the transfer to the buyer's account.
5. Stage five - debiting the buyer's account. The issuing financial institution forwards the finances to the executing bank. At the end, the seller gets his money.

Sberbank letter of credit

What are the advantages and disadvantages of an irrevocable letter of credit?

Answering the question, a covered irrevocable letter of credit - what is it, it is also important not to forget about its most basic plus - it fully and completely guarantees that all deliveries of the seller will be fully paid only if all the provisions indicated in the letter of credit agreement are fulfilled. But there are other advantages, among which are the following:

1. Presentation by the issuing bank of firm obligations to fulfill payments.
2. Minimizing the risks of receiving refusal of payments.

However, there is also a drawback. To cancel or change a letter of credit, it is necessary that all interested parties give their consent. It is for this reason that it is necessary to prescribe each condition in time.

What to do if the case ends in litigation

As a rule, calculations using this method very often lead to various conflicts. Often the parties do not understand each other even at the stage of drawing up an agreement.

Let's say the most common question is the responsibility that they bear to the payer due to non-return of finances banking organization- by the issuer. In this case, payment must be made by credit institution. Before it, the executing bank is responsible.

In the article, we will analyze the concept of a letter of credit, why it is needed, what transactions are reflected in the accounting of an enterprise. Here I will try to explain what is a letter of credit in simple words understandable to every novice accountant.

In accounting, there is another account for accounting for cash, this is account 55 “Special bank accounts”, which records letters of credit, and.

What does letter of credit mean?

Letter of credit- This is a special bank account where you can reserve funds for. Letter of credit settlements are convenient for both the buyer and the seller. The seller will be sure that his goods or services will be paid for, and the buyer will know that he will be able to pay for the goods he has purchased and there will be no debt to the supplier.

For each supplier, you need to open a letter of credit separately. Accounting for letters of credit is carried out on account 55 “Special bank accounts”, on which a special sub-account 1 is opened.

Types of letters of credit

Covered letter of credit when money is debited from the buyer's current account and deposited by the bank for subsequent payments to the supplier. At the same time, accounting entry D55/1 K51.

The buyer cannot dispose of the funds in the covered letter of credit until its validity period expires. Opening a covered letter of credit is convenient if we plan to make a purchase in the near future and want to reserve money for this so as not to spend it on something else.

When the funds of the covered letter of credit are transferred to the supplier, the following entry is reflected in the accounting records D60 K55/1.

If the covered letter of credit is not used in full, then the balances are returned to the current account, this is documented by posting D51 K55/1.

For its services, the bank takes a commission, in the accounting department these expenses are written off as an increase in the cost of purchased material assets (D08 (10, 41) K51) or are taken into account in ( D91/2 K51).

Recording entries for a covered letter of credit

Uncovered letter of credit: the supplier's bank writes off funds from the buyer's bank account for the amount of the opened letter of credit. The funds of the buyer himself remain in circulation until the money is debited from the correspondent account of the servicing bank.

It is convenient because the money is in circulation and you do not need to freeze it for a while.

If there is no money on the buyer's current account, the bank will take them in parts as the funds arrive.

When opening an uncovered letter of credit, it is taken into account on the off-balance account 009 ( D009). Payment to the supplier of the required amount in accounting is recorded by posting D60 K51, at the same time the same amount is debited from 009 ( K009).

Trade relations between partners are quite complex. There is always an element of risk when the goods are shipped without payment or vice versa - payment without receiving the goods. To reduce the risks associated with such operations, as well as to facilitate and speed up settlements, various tools are used. One of them is a letter of credit.

Letter of credit in simple words

Under letter of credit understand the instruction that the payer gives to his bank to transfer funds in favor of the recipient, upon the occurrence of certain conditions. This form of payment is most often used in trade.

Its main advantage is the reliability of payment on the part of the supplier, as well as the confidence on the part of the buyer that the seller will fulfill all its obligations in full.

bank letter of credit- this is a form of payment that is safe and gives certain guarantees to the participants in the transaction, which speeds up the process of shipment of goods, and then payment.

Despite certain inconveniences that arise when using a letter of credit, most clients, especially large ones, are happy to use this method of mutual settlements.

The letter of credit is also widely used in international trade or in the development of a new market, when most counterparties are unfamiliar. In such cases, working with unfamiliar buyers is fraught with great risks, therefore it is important that both parties have a guarantee of performance of obligations, and a third party checks this ( bank).

The basis for the transaction is a letter of credit in documentary form. Most often, it is used when settling with an unfamiliar company, especially when it comes to a contract for a large amount.

The protection against fraud that a letter of credit provides is highly valued. Therefore, if an enterprise once resorted to this form of calculation, then in the future it continues to use it constantly.

When concluding a transaction using a letter of credit, the following entities take part:

Types of letters of credit

There are several types of letters of credit. Each of them has its own specifics, so the client should carefully study the features of the conditions of each and choose the right one for himself:

1. Covered letter of credit this is a form of mutual settlements, which is common in Russia. In international settlements, this form is not used. When opening a letter of credit, the buyer's bank transfers the amount specified in the agreement in favor of the seller's bank, which will settle with the recipient. Funds are with the executing bank throughout the entire period of the letter of credit.
2. Uncovered - when using this form of payment, the issuing bank does not transfer funds, but entitles the seller's bank to write off funds in the amount of the letter of credit from the correspondent account opened with the issuing bank. In international practice, this form of letters of credit is usually used everywhere.
3. Revocable letter of credit– it can be canceled based on the unified rules and customs for documentary letters of credit. At international relations this form is not used.
4. Irrevocable letter of credit it is one that cannot be annulled.
5. Confirmed letter of credit- implies the obligation of the executing bank to transfer funds to the recipient, regardless of the crediting of funds by the issuing bank.
6. Circular - allows you to receive funds under a letter of credit in all correspondents of the bank that issued the letter of credit.
7. With red clause- according to this form of calculation, the issuing bank instructs the executing bank to credit the recipient's account with part of the funds before providing all required documents under the conditions stipulated in the contract.
8. Revolving - a letter of credit that is opened for a certain part of payments and is automatically renewed, as payments are made for a certain batch of products.
9. Transferable letter of credit- who, by order of the intermediary ( 1st beneficiary) can be transferred by its bank in favor of the supplier ( 2nd beneficiary). The first recipient with this form of payment may make some changes to the terms of the letter of credit. He can change the amount, delivery time, but only down.
10. Standby letter of credit- acts as a guarantee of the performance of the contract. It is an obligation of the issuing bank to pay the recipient in case of violation of the terms of the contract by the buyer.

Letters of credit and other forms of payment, video:

Making payments under a letter of credit

When concluding a purchase and sale transaction, all conditions are negotiated, including the form of payment. All this is set out in the contract between the parties. If partners will use a letter of credit form of payment, then the contract must specify some conditions:

• the name of the bank issuing the letter of credit;
• the name of the bank making the payment;
• recipient details;
• type of letter of credit;
• sum;
• methods of notification;
• validity;
• the deadline for providing documents and fulfilling the requirements of suppliers;
• the responsibility of the parties.

The payment is made by bank transfer to the recipient's account. Banks are responsible for compliance with the terms of the agreement, the correctness and completeness of the documents provided.

Therefore, they are also an interested party and exercise control over the correctness of the transaction.

Letter of credit advice

One of the important stages of work with letters of credit is the advising of letters of credit.

The advising process is very responsible. The rules for working with advising are clearly spelled out by existing legislation.

Often banks violate them and treat this process superficially, which is fraught with serious consequences.

Often there were cases of sending a letter of credit by unsecured means, for example, by mail, which carries risks.

There is also the possibility of fraudulent transactions, this can lead to unauthorized payments on fake documents.

Letters of credit for individuals

The letter of credit form of payment is also used in transactions individuals. Unlike business entities, ordinary people for the most part have no idea what a letter of credit is and how this form of payment can be used to their advantage.

The essence of a letter of credit does not change - it acts as a guarantee of security in settlements between certain entities. Therefore, it is used as protection against fraudsters, when buying expensive goods, most often real estate.

Many banks offer their customers to use a safe deposit box for such transactions. In this case, the buyer deposits money in the cell in the presence of the seller, the amount is checked, then the goods are transferred.

Upon receipt of the necessary documents, the bank provides the seller with the opportunity to receive funds from the cell. This procedure reduces the risk of fraudulent transactions, but is quite complex and capacious.

A simplified form of these payments is a letter of credit. To use it in settlements, you need to visit the bank, stipulate the conditions, sign the contract. But all further actions to control documents evidencing the completion of the transaction and the payment are made directly by banks.

Using a letter of credit, video:

Sberbank letter of credit for individuals

Not all banks provide the opportunity to use a letter of credit for individuals. Sberbank is a leader in providing services to the population, through which many transactions are carried out, including those related to the purchase / sale of real estate. It is in such operations that the letter of credit form of payment is most often used.

A feature of the transaction for the sale of real estate is that the transaction is considered completed, everything will be registered accordingly. The seller does not want to do this until the funds are received.

For the buyer, there is a risk that having paid for the purchase of real estate, he may face the fact that the seller does not complete the transaction by registering and the money will be lost. In this case, you can try to return them, and even then only through the court, which entails a loss of time, nerves and money.

If all participants in the process agree to settle using a letter of credit for the purchase of real estate, then the buyer contacts Sberbank and fills out.

At the same time, the seller must open a bank account, which will be the executing one. After completion of all procedures, the seller is obliged to provide a set of documents, which is agreed in advance with the beneficiary's bank.

He checks them, if everything complies with the terms of the letter of credit, the funds are credited to the recipient.

Mutual settlement with the use of a letter of credit for individuals solves the main issue - it guarantees security for both parties. But, nevertheless, the service is not very actively used. There are several reasons for this:

Nevertheless, the service is becoming more and more popular, despite some shortcomings. This is due to the increase in the financial education of citizens. People understand that you have to pay for safety and comfort, and more and more often they do not save on this.

Outcome

Letters of credit are widely used abroad, as well as in international transactions. In Russia, this form of payment has also gained popularity and is often used by legal entities and individual entrepreneurs.

Among individuals, the service is not yet very popular. This is due to the complexity and high cost of the process.

When making trade transactions, letter of credit settlement systems have certain advantages:

• operation safety;
• guarantee of fulfillment of obligations by the parties;
• the procedure for payment and force majeure is duly agreed and guaranteed by banks;
• no need to work with large amounts of cash;
• the responsibility for verifying the legitimacy of the transaction lies with the bank;
• settlement with the help of a letter of credit can be carried out by providing a loan by a bank.

However, there are also disadvantagesthat scare away customers. There are not many of them, but they are essential:

• high cost - banks charge a large commission for their work;
• complex operation requiring work with a large number of documents.

Clients carrying out operations on large sums, which carry risks, actively use just such a settlement scheme. Warranty and safety comes first and they try not to save on this.

Banks are active participants in the process. Settlements using a letter of credit are capacious, because the high cost banking services quite justified. After all financial institutions assume some responsibility, improper fulfillment of obligations can lead to dangerous consequences.

Letters of credit for individuals also exist. Their purpose, advantages and disadvantages are the same as for legal ones. But they are not as widespread. It's all the fault of the usual greed of an ordinary citizen who hopes for "maybe", saving on security.

Each of us has seen the result of this more than once in the news or newspapers, which describes another fraudulent scheme with which they deceived people, defrauding them of large sums of money.

That is why it is necessary to educate yourself. Anyone who owns a certain amount of money and is trying to perform any operation is a potential victim of scammers. Every day, scammers invent new schemes in order to take possession of other people's money.

A letter of credit is a tool that helps to minimize risks in trading operations both for businesses and individuals.

The settlement procedure between legal entities is almost always carried out exactly by bank transfer. This procedure has its own characteristics, is carried out in accordance with legislative acts.

In almost all cases, without exception, a special cash letter of credit is used. It is a payment document (electronic or in writing), indicating the obligation to transfer money.

Both in the territory of the Russian Federation and in other countries, there are many varieties of letters of credit. One of the most commonly used is the covered letter of credit.

Required Information

Today, the procedure for transferring funds from one legal entity to another should be carried out by bank transfer. The basis for the transfer are a variety of payment documents. The main one is a letter of credit.

The procedure for its use is regulated by special legislative norms. All of them will need to be reviewed.

Significant issues that need to be considered in advance include:

• basic concepts;
• what is their purpose;
• legal base.

Basic concepts

The list of legislative acts that cover the issue of using a covered letter of credit and other types of documents is not long. But for their correct interpretation, it will be necessary to carefully study all the terms used in them.

The main ones include the following:

• letter of credit;
• monetary obligation;
• issuing bank;
• clerk;
• beneficiary;
• bill of exchange.

The letter of credit itself	This is a financial obligation. The basis for the payment is any financial order. This calculation procedure can be used for settlements both between legal entities and individuals. The most significant document that all banks of the Russian Federation are required to rely on when conducting operations is
Monetary obligation	One of the varieties of civil law relations. It is for this reason that all operations of this kind are regulated precisely by the Civil Code of the Russian Federation. In this case, the obligations of one legal entity in relation to another are always implied.
Issuing bank (also called issuing bank)	Represents an institution that translates certain sums of money. Also, the issuing bank means a company that works with letters of credit. The term “applicant” means the person making the payment under the letter of credit.
Beneficiary	The person who is in this case recipient of all funds
bill of exchange	Represents a variety security, which is compiled in strict prescribed form. This document contains an unconditional offer to pay a certain amount of money. often used in banking
Covered letter of credit	This is a letter of credit in which the issuer transfers a certain amount at the expense of the payer to the bank that is the executor on instructions. Moreover, this amount is provided for the entire period of the order.

What is their purpose

Today, covered letters of credit allow solving a large number of different tasks at the same time.

First of all, these include the following:

Such a payment method as a letter of credit can be used simultaneously or instead of the following varieties:

• deal;
• collection;
• open account.

On this moment in the territory Russian Federation this is not practiced, but in other countries and in the international arena, a letter of credit is used to finance a transaction by analogy with bank guarantees.

It is important to remember that international letters of credit are formed and used in accordance with special legislation.

These are the following:

• Uniform Rules for Documentary Letters of Credit;
• publication of the International Chamber of Commerce No. 600 dated 01.07.07

Legal framework

The use of letters of credit is quite widespread in the territory of the Russian Federation. The reason for this is the relatively recent adopted law, according to which all amounts above a certain amount must be transferred by bank transfer.

Main legal document, which regulates the procedure for using a covered letter of credit, is Civil Code RF.

Article No. 867 of the Civil Code of the Russian Federation includes the following main points:

When making settlements, the bank is obliged to carry out some or all of the actions	make payments to the recipient; pay a bill (perform other actions with it)
If it is necessary to open a covered letter of credit upon opening	It will be necessary in without fail transfer the amount to the executing bank
If an uncovered letter of credit is being opened	The entire amount can be debited in full from the account with the issuing bank
All settlement procedures for letters of credit	are regulated current legislation, as well as various pre-established banking rules

There are a large number of features associated with the use of a covered letter of credit. That is why it will be necessary to carefully read all of them.

It is also important to remember that the process of using a letter of credit must be carried out in accordance with the regulations established within the bank itself.

No less close attention will need to be paid to the "Regulations on the rules for the transfer of funds." This document was approved by the Bank of the Russian Federation

It includes the following main sections:

Also included is a fairly extensive set of various kinds of applications. If possible, you will also need to familiarize yourself with them.

And not only to bank employees related to the execution of the type of payment orders in question. But also by ourselves legal entities who are members of such payment systems.

The use of a covered letter of credit must be carried out in accordance with the rules established by the bank itself. They are individual.

Features of use

The procedure for using this type of payment orders has some peculiarities. They are covered in legal documents.

List of questions to consider beforehand:

• opening order;
• what do the calculations involve?
• what is the unused amount subject to;
• Which accounting entry reflects the use of a covered deposited letter of credit;
• if revocable.

Opening order

To open a letter of credit, you will simply need to submit an appropriately drawn up application to the selected issuing bank.

This type of application must include the following:

• full name of the issuer;
• full name of the recipient company;
• designation of the bank executing the operation;
• type of letter of credit;
• terms of payment for the letter of credit;
• the main list, as well as the characteristics of this document;
• the date on which this payment order will be closed;
• full name of works, services and goods - for the purpose of payment of which this letter of credit will be used.

After the legitimacy of opening a letter of credit is confirmed, the bank draws it up on a special form. It is marked as special.

If for some reason it is necessary to attach an extensive list of documents to the letter of credit, then an additional annex can be drawn up.

Be sure to indicate the account number through which it will be necessary to transfer funds.

What do the calculations include?

To date, the procedure for settlements under a letter of credit includes the following:

It is due to the simplification of the calculation procedure that the time required for the implementation of all actions is significantly reduced.

When implementing the first paragraph of the plan, the letter of credit will need to indicate the following:

• the amount of the letter of credit itself - must be indicated in rubles;
• duration of action;
• the exact designation of the document, its number;
• confirmation of the shipment of goods.

What is the unused amount

Unused account balance can be used different ways. At the same time, this moment is regulated primarily by the type of a particular letter of credit.

If funds are used, they will be returned to the lender. If it is your own, then it is required to transfer them to another account belonging to the owner of the funds.

Enough to be remembered in large numbers nuances associated with the transfer of unused amounts. It must be properly reflected in the financial statements.

What accounting entry reflects the use of a covered deposited letter of credit

It is imperative that the use of a covered deposited letter of credit be properly reflected in the financial statements.

This procedure has its own characteristics. Therefore, you should carefully read all the nuances as much as possible. The easiest way to study this issue is with an example.

Covered letter of credit entries are as follows:

A covered letter of credit is otherwise called abroad. The main feature of using such a procedure is that all letters of credit, without exception, outside the Russian Federation are covered.

If revocable

Such a procedure can be carried out:

• bank;
• payer.

But it should be remembered that in international cooperation of this type, letters of credit simply do not apply. They are used only within the Russian Federation in certain situations.

Application of this type is required in some special cases. For example, when drawing a tender for construction, as well as some others.

The very fact of the absence of the use of this kind of letter of credit in the implementation of international settlements is reflected in special rules.

It is important to remember the complexity of the implementation of the revocation procedure itself - it must be carried out in accordance with the law and not violate the rights of the parties to the transaction.

Judicial practice on this matter is rather ambiguous, therefore it is worth avoiding conflicts.