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What isthe importance of LC or Letter of Credit?
Accounting Auditing Financial Reporting Financial Accounting IFRS
Question added by Wilfredo Quito , Accounting Manager , DDC LAND INC.
Date Posted: 2016/10/22
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by Ahmed Mostafa , Manager, Forensics , KPMG ME
It makes the selling process easier specially when the selling be between tow parties out side the country as it encourage the parties to deal together in a guaranteed process
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by Anil Lalwani , Chief Accountant , Al Ahli Hospital
Thanks for inviting:
Below points shows the importance of Letter of Credit.
- The seller has the obligation of buyer's bank's to pay for the shipped goods.
- Reducing the production risk, if the buyer cancels or changes his order
- The opportunity to get financing in the period between the shipment of the goods and receipt of payment (especially, in case of deferred payment).
- The seller is able to calculate the payment date for the goods.
- The buyer will not be able to refuse to pay due to a complaint about the goods
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by Ahmed mohsen , Senior Accountant , Main Poly Clinic
is aletterfrom a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.
by Tamer Elbeshbishy , Financial and Administration Manager , Muscat Towers Holding Group
The importance is the it plays the needed role to guarantee both of the seller and purchaser in a legal and satisfied way . Other explanations also are correct given by colleges .
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by Tomasz L , Reporting Specialist , Outworking
The most important task is to secure the proper conduct of transactions. Under uncertainty every form is good
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by Saifullah Saifi , Accountant , United Brothers Trader
Thanks for invitationLetter of credit is an instrument which minimize the risk for the recovery of payment or receivables. Espacially when we are dealling outside the country
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by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Thanks for invitation
I agree with the opinions given
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by mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia
AL-C is a document, typically from abank(issuing bank), assuring that a seller (beneficiary) will receivepaymentup to the amount of the letter of credit, as long as certain documentary delivery conditions have been met. In the event that the buyer (applicant) is unable to make payment on the purchase, the beneficiary may make a demand for payment on the bank. The bank will examine the beneficiary's demand and if it complies with the terms of the letter of credit, will honor the demand
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by manseer muhammed ali , Accountant General , Royal Lighting L.L.C & Royal Furnishing LLC
Letters of credit accomplish their purpose by substituting the credit of the bank for that of the customer, for the purpose of facilitating trade. There are basically two types: commercial and standby. The commercial letter of credit is the primary payment mechanism for a transaction, whereas the standby letter of credit is a secondary payment mechanism.
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by kamran khalid , Head Of Finance , Pace College
Thanks
1- Elimination of risk of losing money for the Buyer2- Payments are made after fulfilment of the Seller's contractual obligations3- Transfer of ownership over shipped goods to the Buyer within the period indicated in the LC and according to other terms.
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by Abdullah Aziz Eldain Morsi Elgendy - CMA Candidate , Regional Receivable Accountant , Amiantit Group of Companies
it is used as of the safe tool to the receivables of a company be making the bank lining with the customer to save the customer payment from losing
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