LC Commission and Charges Income
Recognizing commission earned for issuing a letter of credit.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash / Customer Account (Fee Deducted) | Asset/Liability (−) | 2,000.00 | - |
| LC Commission Income (Trade Finance) | Revenue (+) | - | 2,000.00 |
💡 Accountant's Note
LC commission is typically charged as a percentage of the LC value per quarter or at inception. Under IFRS 15 / IFRS 9, it is recognized over the LC validity period if it relates to the ongoing obligation to honor documents, or at inception if it is a point-in-time service.
Practitioner & Systems Framework
💻 ERP Architecture
In SAP TRM-TF, commission is charged automatically based on the LC product's fee schedule. In Oracle FLEXCUBE BC module, commission accrual and billing is handled by the 'Charge Definition' linked to the LC product. SWIFT MT799 may be used for free-format messages to correspondent banks regarding charges.
⚠️ Audit Flags
Auditors review whether commission is recognized upfront or over the LC tenor. Under IFRS 15, if the commission relates to the bank's contingent performance obligation, it should be deferred and amortized over the LC validity period rather than taken fully at inception.
📄 Required Documentation
Approved schedule of charges, commission billing advice, LC validity period documentation, and revenue recognition policy for trade finance commissions.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.