Letter of Credit

Letter of Credit

Letter of Credit

Reading Time: 3 minutes

Letter of Credit (“LC”), is a key instrument for international trade. In FastAccounts.io, there is a dedicated Module to handle the Letter of Credit and its reporting and other data.

We have covered

  • Setting up Letter of Credit
  • Letter of Credit Expenses via Bank
  • Letter of Credit Expenses via Supplier
  • Letter of Credit Products
  • Cost Allocation

Setup Foreign Currency Customer / Supplier

In the main menu

  • Select “Letter of Credit”
  • Choose “LC”, this will provide a List of Letters of Credit.
  • Select “Add New”, this will open a new Letter of Credit Form
  • Fill in the necessary data for the Letter of Credit and press “Save & Close”

LC Expense Via Bank

Record the expense as normal in the Bank Payments and select Letter of Credit from the dropdown list. It is important to note that expenses you would like to allocate to the product cost should be recorded to a balance sheet nominal account in the Current Assets.

LC expenses via Supplier

In case a supplier has sent you a bill for the expense related to the Letter of Credit, simply go to the Supplier Bill and record the bill, remember to select the Letter of Credit from the dropdown.

LC Purchase of Products

Simply, go to Supplier bill and record the commercial invoice from the supplier and select the Letter of Credit from the dropdown list to link with LC.

Cost Allocation

Once all the expenses and product data have been recorded, go to Letter of Credit and select Cost Allocation.
The Cost Allocation Process is similar to the Landed Cost. In this process the expenses incurred will be linked to the stock products cost.

In the Expenses Section, select Letter of Credit from the dropdown list and press “Load” all the expenses related to the letter of credit will be loaded. This includes both Bank Payment and Supplier Bills. Remove the expenses which are not relevant or choose the amount you would like to offset with the product bill.

In the Products section, enter the bill number which has the product data and press “Load Products”, all the stock products will appear. Allocate the cost, there are 4 different methods of cost allocation provided. By Amount, Quantity, Manual Amount or Manual Percentage.

Tip: First Use Amount or Quantity method and switch to Manual Amount to update the numbers.

Once ready press Save and Close.

In this process, the expenses incurred on the Letter of Credit will be charged to the product cost.

On the letter of Credit list, there is an option to print Letter of Credit Expenses or Products Data. Once a letter of credit is closed/expired, make it inactive and it will not appear in future transactions.

For further information please contact FastAccounts Support Team.