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Letter of Credit

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A letter issued by a bank to another bank as a guarantee for payments under the specified contract between the buyers and the sellers.

The issuing bank guarantees that the buyer receiving the payment from the seller in exchange for goods or services will be on time and for the correct amount.

If the seller is not able to make payment against the purchase, the bank will cover the payment amount.

Thus, the real purpose behind issue of letter of credit is to ensure successful business transactions between sellers and buyers. It is an instrument facilitating ease of doing business.

Types of Letter of Credit

There are various types of letter of credit (LC) in the trade transactions viz.

  • Commercial Letter of Credit,
  • Transferable and Non-Transferable LC,
  • Revocable and Irrevocable, Stand-by LC,
  • Confirmed  & Unconfirmed LC,
  • Revolving Letter of Credit,
  • Back to Back Letter of Credit,
  • Red Clause Letter of Credit,
  • Green Clause Letter of Credit,
  • At Sight Letter of Credit,
  • Deferred Payment Letter of Credit,

Parties to a letter of credit

  • Applicant (Purchaser/ importer)
  • Issuing bank i.e. importer’s bank which issues the LC
  • Beneficiary /Seller exporter

Simple Credit Journal Entries

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Credit transaction means any transaction by the terms of which the payment for business transaction is to be made at a future date.

For credit transaction we directly debit or credit in the name of person or company

Credit journal entries refer to a transaction in which the amount payable or receivable will be paid or received at a later date. E.g. Credit sales and Credit purchases.

List of Journal Entries in Video

  1. Capital introduced
  2. Withdrawal from business
  3. Purchase of Material
  4. Sale of Material
  5. Salary Payment
  6. Interest Income

2.1.  Mr. Bharat introduced Rs. 20,000/- is the business as capital

PARTICULARSDRCR
Cash A/c             
To Mr. Bharat’s Capital A/c
(Capital Introduced)		20,000.00

  20,000.00

2.2. Mr. Bharat withdrawn Rs. 1,200/- for his personal use

PARTICULARSDRCR
Drawing  A/c             
To Cash  A/c
(Amount withdrawn for personal use)		1,200.00

  1,200.00

2.3. Mr. Bharat purchased goods of Rs 10,000.00 from Ramesh on credit.

PARTICULARSDRCR
Purchase  A/c             
To Ramesh A/c
(Material purchased )		10,000.00

  10,000.00

2.4. Goods of Rs. 12,000 sold to Mr. Shyam on credit.

PARTICULARSDRCR
Shyam,s A/c             
To Sales A/c
(Material purchased )		12,000.00

  12,000.00

2.5. Salary for last month of the year of Rs. 800 paid in the next financial year.

PARTICULARSDRCR
Salary  A/c             
To Salary Payable A/c
(Salary paid )		800.00

  800.00

2.6. Interest amount of Rs. 600 for the last month of year received in next financial year.

PARTICULARSDRCR
Interest Receivable  A/c             
To interest A/c
(Salary paid )		600.00

  600.00

Simple Journal Entries

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Journal Entry

In the age of manual accounting system, business transactions are first noted in a Journal Book. The journal entries are punched in a journal in order by date and are then posted into the proper accounts in General Ledger.

Journal will contain of the following:

  • Date of transaction
  • Amount & account that will be debited in journal
  • amount & account that will be credited in journal
  • a short description /narration

Under computerised accounting system environment software will automatically punched business transactions into the general ledger.

List of Journal Entries in Video

  • 1. Capital introduced
  • 2. Withdrawal from Business
  • 3. Purchase of Material
  • 4. Sale of Material
  • 5. Salary Payment
  • 6. Interest Income

1.1.  Mr. Modi introduced Rs. 10000/- is the business as capital

PARTICULARSDRCR
Cash A/c             
To Mr. Modi Capital Capital A/c
(Capital Introduced)		10000.00  10000.00

1.2. Mr. Modi withdraw Rs. 600/- for his personal use

PARTICULARSDRCR
Drawing  A/c             
To Cash  A/c
(Amount withdrawn for personal use)		600.00  600.00

1.3. Mr. Modi Purchased goods for Rs. 5000/-

PARTICULARSDRCR
Purchase  A/c             
To Cash  A/c
(Material purchased )		5000.00  5000.00

1.4. Mr Modi sold material for Rs. 6000/-

PARTICULARSDRCR
Cash A/c             
To Sales A/c
(Material purchased )		6000.00  6000.00

1.5. Mr Modi paid salary of Rs. 400/- against Salary

PARTICULARSDRCR
Salary  A/c             
To Cash  A/c
(Salary paid )		400.00  400.00

1.6. Interest received Rs. 300/-

PARTICULARSDRCR
Cash  A/c             
To interest A/c
(Salary paid )		300.00  300.00

Thumb Rule for DEBIT CREDIT

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Firstly, you need to identify number of accounts involve in the particular transaction. After identifying account involve in business transaction, you must debit one account and must credit other account.

Any (+) Increase in Assets, Drawing, Expenses i.e. increase in [ADE] always DEBIT

Any (+) Increase in Liabilities, Capital, Income i.e. increase in [LCI] always Credit

DR. and CR. are used as short form of debit and credit.

To debit an account means to enter an amount on the left side of the journal.

To credit an account means to enter an amount on the right side of journal book.

DateParticularL.F.Amount
Dr		Amount
Cr

SBI Reduced Deposit Rate

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On Sunday , Mr Prime Minister of India said that huge bank deposit Rs 5000 Crore approx after demonitzation are not going to kept idle . Days after Prime Minister signalled that rates are on the way down, SBI reduced bulk deposit rates by up to 1.9 per cent on today.

Other banks may follow the way of the country’s largest bank. If such happens, it will on the path of low cost advances for new/ existing enterpneurs and on other hand  this will be a slap for interest rate arbitrator who takes the benefits of interest rate difference in International Market.

SBI has reduced interest rates on bulk deposits ranging between Rs 1-10 crore. The new rates are effective tomorrow, SBI website showed.

For 180-210 day fixed deposit will attract 1.90 per cent lower interest rate at 3.85 per cent as against the 5.75 per cent earlier. 

For fixed deposits between 1 year to 455 days, the rate has been lowered to 6 per cent from 4.25 per cent. 

For FDs between 7 days to 45 days, the new rate will be 1.25 per cent lower at 3.75 per cent. 
Earlier this month, SBI had cut fixed deposit rates for less than Rs 1 crore  by up to 0.15 per cent. 

GST Registration schedule

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Enrolment Schedule for your State for GST Registration

The schedule of the enrolment activation drive for states is given below. We encourage you to complete the enrolment during the specified dates. However, the window will be open till 31/01/2017 for those who miss the chance.

States Start Date End Date
Puducherry, Sikkim 08/11/2016 23/11/2016
Maharashtra, Goa, Daman and Diu, Dadra and Nagar

Haveli, Chhattisgarh

 14/11/2016 30/11/2016
Gujarat 15/11/2016 30/11/2016
Odisha, Jharkhand, Bihar, West Bengal, Madhya Pradesh,

Assam, Tripura, Meghalaya, Nagaland, Arunachal

Pradesh, Manipur, Mizoram

 30/11/2016 15/12/2016
Uttar Pradesh, Jammu and Kashmir, Delhi, Chandigarh,

Haryana, Punjab, Uttarakhand, Himachal Pradesh,

Rajasthan

 16/12/2016 31/12/2016
Kerala, Tamil Nadu, Karnataka, Telangana, Andhra

Pradesh

 01/01/2017 15/01/2017
Enrolment of Taxpayers who are registered under

Central Excise Act/ Service Tax Act but not registered under State VAT

 01/01/2017 31/01/2017
Delta All Registrants (All Groups) 01/02/2017 20/03/2017

500 and 5000 notes baned

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​8:34 pm: This is a chance for every citizen to take part in the fight against black money and corruption, says the prime minister.

8:32 pm: A new series of Rs. 500 currency notes and Rs. 2000 currency notes will be brought into circulation.

8:31 pm: Banks will be closed on November 9.

8:30 pm: There is no restrictions on internet banking, cash, demand draft transactions.

8:27 pm: Rs 10,000 daily cash withdrawal and Rs 20,000 weekly cash withdrawal limit

8:25 pm: There are, however, some exemptions. Government hospitals and international airports.

8:22 pm: The ATMs will not function till November 9, and in some places till November 10.

8:21 pm: People who possess Rs.500 or Rs. 1000 currency notes after December 30 can exchange it at Reserve Bank of India by providing a declaration. This is till March 31, 2017.

8:20 pm: These notes should be exchanged in banks and head post offices and sub post office within December 30, 2016, by providing a valid identity proof such as Aadhaar, PAN card or voter ID card.

8:15 pm: From midnight of November 8, 2016, Rs. 500 and Rs.1000 will cease to be legal tender. “These notes are just papers from tomorrow,” says the prime minister.
8:11 pm: Prime Minister says Rs. 500 and Rs.1000 are notes are mostly used in black money.

GST

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Centre Govt may propose 26% peak rate for GST

The Centre Government is likely to propose a four-tier tax structure under the GST, with a peak slab of 26 per cent. Almost 20-25 per cent of all taxable goods, including those consumed by the middle class, could come under the peak rate.The idea is to arrive at a common ground with the states that are concerned over revenue loss.A discussion paper to be presented at the three-day GST Council meet that begins on Tuesday is believed to have proposed a standard rate of 18 per cent.

Source : http://www.business-standard.com/article/economy-policy/centre-may-propose-26-peak-rate-for-gst-116101701382_1.html

GST BASIC

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About Goods and Service Tax (GST)

GST Introduction:

GST is a indirect tax applicable to whole India.

GST is a single tax applicable on goods and services right from manufacture to retailer who sell the goods to ultimate consumer.

GST need:

To eliminate prevailing multiplicity. complexity and ambiguity in the area of indirect tax, one single tax was required to be implemented. GST will replace indirect tax levies and proposed Acts are as under:

Central Level Tax: proposed to merge

1.  Custom Duty
2.  Excise Duty
3.  Corporation Tax
4.  Service Tax
5.  Central Sales Tax
6.  Stamp Duty in respect of bill of exchange, cheque & promissory notes.

State Level Tax: proposed to merge

7.  Sales Tax ( VAT)
8.  Entry & Octroi Tax
9.  Tolls Tax
10.  Luxury Tax
11. Taxes on lands and building
12. Excise Duty on alcoholic liquor etc.
13. Stamp Duty in respect of documents

State Level Tax: proposed to merge

Under GST, GST & CGST would be levied simultaneously on the transaction of enterprises except on exempted goods and services. Important to note here both the tax CGST & SGST would be levied on same price/Cost unlike the VAT which is levied on value of goods inclusive of CST.

Movement of Tax : Sale within state

Movement of Tax : Sale interstate

Black Money Disclosure

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Black money disclosure at Rs 65,000 crore till 8.00 pm

The government’s Income Declaration Scheme (IDS) saw an overwhelming response just a few hours before the deadline was to end.

A senior income-tax official said the total declaration under the scheme is above Rs 65,000 crore till 8.00 pm. On this number, government likely to earn nearly Rs 30,000 crore.
I-T department expects total declarations could reach between Rs 70,000 crore and Rs 80,000 crore in next 3 hours.
The government had opened a four-month window for declaring unaccounted money, which would attract 45 per cent tax, penalty and cess.
Surprisingly Hyderabad emerged as a top destination with declaration of Rs 13,000 crore, followed by Mumbai ( Rs 8,500 crore), New Delhi (Rs 6,000 crore) and Kolkata (Rs 4,000 crore). The total number of declarant from Mumbai is 4,000.
The four-month window for disclosing domestic black money deposits will close on Friday
– Business Standard

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