Letter of Credit and Parties of it

A letter of credit can be defined as an understanding under which a bank acting at the request of a customer undertakes to pay to a third party a fixed amount by a given date which is agreed on by both the customer and the third party. Letters of credit are used mostly in international trade transactions of major value, for deals between a supplier in one country and a customer in another.

There are 4 parties to a letter of credit. They are –

1. Applicant – It is the importer who has bought the goods and wants to pay for those goods by opening letter of the credit through bank.

2. Issuing Bank – It is the bank which opens the letter of credit on the request of the importer.

3. Beneficiary – It is the exporter who has sold the goods and in whose favor letter of credit is opened.

4. Advising Bank – It is the bank which informs the exporter about the letter of credit being opened at the request of issuing bank.

1 comment… add one

Leave a Comment


Related pages


disadvantages of diversificationforfeiting definitionpros of a command economypros and cons of market segmentationvaluation of goodwill and sharesfictitious assets wikipediabackward integration advantages and disadvantagesforeign exchange rate quotationsadvantages and disadvantages of capital budgeting techniquesprivatationsprepaid wages journal entryplanned economy advantages and disadvantagesdisadvantages of diversificationmonopolistic competitionsaccrued income examplesdefine junk bondswhat is the difference between tariffs and quotashow to fill out a withdrawal slip at a bankdefine nondurable goodpure competition market structurejournal entry for provision for expensesmeaning of fifo methodcheque and draft differencelimitations of capital budgetingsalaries payable journal entryhigher education advantages and disadvantagesdisadvantages of income statementdifference between consignor and consigneeexamples of primary industryadvantages and disadvantages of stock marketwhat is conglomerate in economicsfeatures of a perfectly competitive marketadvantages of discounted cash flowunsystematic risk and systematic riskcapitalism disadvantagesdifference between bills payable and accounts payablemerits of advertisementeconomics substitution effectunqualified financial statementssalary received journal entrylifo advantagespaid interest on loan journal entryfull form of neft and rtgsdistinguish between explicit cost and implicit costthe bartering systembills of discountingwhat is a floating exchange rate systemsole proprietorship features advantages and disadvantagestrial balance meaningwhat is the meaning of accrued interestcomplementry goodsdu pont identitynormal goods inferior goodsmeaning of forfeiting in financeadvantage and disadvantage of globalizationescrow account meaningprepaid expense journal entryeconomic value added advantages and disadvantagesincome method to calculate national incomeadvantages and disadvantages of cost accountingmarketing skimming strategytransferable letter of credit flow chartbills of discountingconglomerate diversificationlaw of diminishing return in economicshorizontal analysis accounting examplerelevant costing for managerial decisionsdirect expenses and indirect expensesideal debt ratiounsystematic riskrelevant cost managerial accountingwhat is the difference between complementary and complimentarydisadvantages of traditional bankingautocratic managerswhat are the advantages of capitalismthe materiality concepthow to issue junk bondsfullform of cpi