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ACCOUNTING FOR LETTER OF CREDIT

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Letter of credit :-  Itis a document from a bank warranting that a seller will receive payment if the delivery conditions related to sale have been met. In the event that the buyer is unable to make payment on the purchase, the bank will cover the outstanding amount. LC is drawn in most international transactions where the parties in this transaction are unknown to secure the payment from the buyer the seller will ask for letter of credit.

Parties in L C :- Buyer, Buyer Bank, seller, seller bank and carrier
Stages:-
The seller and buyer after conclusion of contract the buyer bank will supply letter of contract to seller

Seller will consign goods to carrier in exchange of bill of lading