How to Settle an L/C Upon Material Delivery
Releasing the L/C and recording the materials when the supplier's shipping documents are presented.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Material Inventory / WIP | Asset (+) | 200,000.00 | - |
| Restricted Cash (L/C Margin) | Asset (-) | - | 50,000.00 |
| Cash in Bank (Balance) | Asset (-) | - | 150,000.00 |
💡 Accountant's Note
When the shipping documents are presented and accepted, the bank pays the supplier and the materials are received into inventory. The L/C margin is released.
Practitioner & Systems Framework
💻 ERP Architecture
Process the Goods Receipt Note (GRN) to debit inventory/WIP. Match it against the L/C settlement transaction from the bank, clearing the restricted cash and deducting the remaining balance from the operating account.
⚠️ Audit Flags
Cutoff and ownership risk (Incoterms). Auditors check the shipping terms (FOB, CIF) to ensure inventory is recognized in the correct period based on when control transferred.
📄 Required Documentation
Bill of Lading, Commercial Invoice, Packing List, bank L/C settlement advice, and GRN.
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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.