Question

Letter of credit and endorsement are shown in the

bank accounts under the head​

Answer 1

Answer:

Current guidance for external sector statistics classifies letters of credit as contingent liabilities of issuing banks, and no financial asset is created until funds are actually advanced.

Answer 2

They are shown under the head Contingent Liabilities.

• The obligation or potential loss associated with this liability depends on how a certain event turns out in the future.
• It is recorded whether the potential exists and it is feasible to calculate the extent of the responsibility. The obligation may be included in a footnote to the financial statements, barring any unmet conditions.
• In essence, Loc and endorsement both refer to the bills that the bank has accepted or endorsed on behalf of its clients.
• A corporation must group all of its endorsements and another engagement under the header of this liability on the balance sheet top.
• Some other examples include - Lawsuit outcome, warranty, and investigation by the government.
• However, it is an off-balance-sheet item.

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