How to Record LC Disbursement to Supplier
Recording the settlement of an account payable to a supplier when the bank pays under a Letter of Credit facility, converting the trade debt into a bank loan.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Payable | Liability | 100,000.00 | - |
| Bank Loan - Letter of Credit | Liability | - | 100,000.00 |
💡 Accountant's Note
When the bank pays the supplier via a Letter of Credit (LC), the trade liability to the supplier is extinguished and replaced by a financial liability to the issuing bank.
Practitioner & Systems Framework
💻 ERP Architecture
Utilize the trade finance module to link the LC document to the original purchase order.
⚠️ Audit Flags
Discrepancies between LC issuance dates and bank payment notifications.
📄 Required Documentation
Bank payment advice, LC terms, and commercial invoice.
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Discussion & Community Questions
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