How to Record LC Under-utilization Fees
Recording fees imposed by a bank when a Letter of Credit is not fully utilized or the shipment value is below the agreed threshold.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Finance Charges | Debit | 500.00 | - |
| Bank Account | Credit | - | 500.00 |
💡 Accountant's Note
Banks may charge under-utilization or non-utilization fees if the actual drawings under an LC are significantly less than the issued amount, as the bank has set aside capital for the full amount.
Practitioner & Systems Framework
💻 ERP Architecture
Capture as a non-operating finance cost in the general ledger.
⚠️ Audit Flags
Large variances between LC issuance amounts and final payment amounts.
📄 Required Documentation
LC closure advice from the bank and the original LC agreement detailing utilization clauses.
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