How to Record Confirmed Letter of Credit Fees
Accounting for the fees paid to a confirming bank to guarantee payment under a Letter of Credit.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Letter of Credit Fees Expense | Expense | 1,500.00 | - |
| Cash at Bank | Asset | - | 1,500.00 |
💡 Accountant's Note
When an exporter requests their bank to add a 'confirmation' to an LC, a fee is charged by the confirming bank to take on the payment risk of the issuing bank. This is recorded as a trade finance expense.
Practitioner & Systems Framework
💻 ERP Architecture
Post to the Finance Charges or LC Fees cost center in the GL module.
⚠️ Audit Flags
Verification of confirmation advice from the bank and matching against the LC terms.
📄 Required Documentation
Bank confirmation advice, LC agreement, and debit note.
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