14. Annexure A - Accounting Entries

This Annexure contains details of the suggested accounting entries that can be set up, for the Islamic Letters of Credit (Islamic LC) module of Oracle FLEXCUBE. The annexure lists details of the following suggested accounting entries, event-wise.

14.1 Islamic LC Events

The following is an exhaustive list of events that can take place during the lifecycle of an Islamic LC. In the subsequent paragraphs we shall examine the accounting entries for each of the events listed below.

Event Code Event Description Remarks
ACCR Accrual (Of Commission) All Types
AMND Amendment All Types
AOCF Amendment from open to open and confirm Import only
AATC Amendment from Advice to Confirm Export Only
APAC Amend - Pre-advice to Adv & confirm Export Only
APAD Amendment from Pre-advice to advice Export Only
AVAL Availment Only For Islamic LCs
BADV Booking Of An Islamic LC With Opera­tion Advise Export Islamic LC Only
BANC Booking Of An Islamic LC With Opera­tion Advise And Confirm Export Islamic LC Only
BCFM Booking Of An Islamic LC With Opera­tion Confirm Export Islamic LC Only
BISS Booking Of An Islamic LC Or Guaran­tee Issue (Open or Open & Confirm) Only For Import Islamic LC, Standby Islamic LC, Clean Islamic LC, Shipping Guarantee And Guarantee
BPRE Booking Of An Islamic LC With Opera­tion Pre-Advise Export Islamic LC Only
CALC Periodic commission calculation All types
CANC Cancellation of an Islamic LC All Types
CLIQ Commission Liquidation All Types
CLOS Closure Of An Islamic LC Or Guarantee All Types
GCLM Guarantee Claim  
RASN Re-assign an Islamic LC contract All types
RAVL Reversal of Availment All types
REIN Reinstating An Islamic LC Revolving Islamic LCs
ROPN Reopening Of An Islamic LC All Types
REVR Reversal of contract All types
ROPN Reopening of an Islamic LC All types
REIS Reissue of Guarantee Guarantee only
MLIQ Manual Liquidation of Islamic LC com­mission  
WAIV Waiver of components during manual liquidation  

Whenever a conversion of currency is involved, the conversion rate used is as follows:

14.2 Amount Tags

Amount Tag Description
AVAIL_SET_AMT Availment amount paid
AVAIL_SET_AMTEQ Availment amount received
COLL_AMNDAMT Collateral amend amount Dr.
COLL_AMNDAMT_EQ Collateral amend amount Cr.
COLLAMT_OS Outstanding Collateral amount
COLLAMT_OS_EQ Outstanding Collateral amount
LC_AMND_AMT Islamic LC Amendment Amount
LC_OS_AMT Outstanding Islamic LC amount
LC_REIN_AMT Outstanding Reinstatement Amount
LIAB_AMND_AMT Liability Amendment Amount
ADV_LIAB_AMND_AMT Liability Amendment Amount for advised Islamic LCs
CNF_LIAB_AMND_AMT Liability Amendment Amount for confirmed Islamic LCs
LIAB_AMT Liability Amount
LIAB_AVAIL_AMT Availment Liability Amount
ADV_LIAB_AVAIL_AMT Availment Liability Amount for advised Islamic LCs
CNF_LIAB_AVAIL_AMT Availment Liability Amount for confirmed Islamic LCs
LIAB_OS_AMT Outstanding liability amount
ADV_LIAB_OS_AMT Outstanding liability amount for advised Islamic LCs
CNF_LIAB_OS_AMT Outstanding liability amount for confirmed Islamic LCs
LIAB_REIN_AMT Reinstatement Amount
ADV_LIAB_REIN_AMT Reinstatement Amount for advised Islamic LCs
CNF_LIAB_REIN_AMT Reinstatement Amount for confirmed Islamic LCs
R Receivable Charge
E Receivable Commission

14.3 Accounting Roles

The following is an exhaustive list that contains details of the Accounting Roles that are applicable to the Islamic LCs you can process at your bank.

Accounting Role Description Role Type
IL_OCU Outstanding Credit Unutilized Contingent Liability
IL_OCU_OFFSET Unutilized Credit Offset Contingent Asset
IL_CNF Confirmation of Islamic LC Real GL
IL_CNF_OFF Confirmation of Islamic LC Offset Real GL
IL_COLL_ACCT Islamic LC Collateral account Liability
AVL_DEBIT_ACCT Availment Debit account Real / Type ‘X’
AVL_CREDIT_ACCT Availment Credit account Real / Type ‘X’
CHG_CUST_ACC Customer Accounts Real/Type ‘X’
COMM_CUST_ACC Customer Accounts Real/Type ‘X’
COLL_CUST_ACC Customer Accounts Real/Type ‘X’
TAX_CUST_ACC Customer Accounts Real/Type ‘X’
COMM_INC Commission Income Income
COMM_REC Commission earned not collected Asset
COMM_PAY Commission collected in advance Liability
CHG_INC Charge Income Income
CHG_REC Charge receivable Asset
CHG_EXP Charge expense Expense
CHG_PAY Charge payable Liability
TAX_PAY Tax payable Liability
TAX_EXP Tax expense Expense

14.4 Event-Accounting Entries

In this section, we will discuss the suggested accounting entries that should be generated for each event in the life cycle of an Islamic LC.

This section contains the following topics:

14.4.1 BISS: Booking of an import Islamic LC

14.4.1.1 Liability

Role Amount Tag Debit / Credit
IL_OCU LIAB_AMT Dr
IL_OCU_OFFSET LIAB_AMT Cr

14.4.1.2 Collateral (If Any)

Role Amount Tag Debit / Credit
COLL_CUST_ACC COLL_AMT_OS Dr
LC_COLL_ACC COLL_AMT_OSEQ Cr
COL_DEPOSIT_ACC COLL_AVLAMTEQ Dr
LCCOLL_INT_ACCT COLL_AVLAMT Cr

Here, the transfer of the collateral from the customer onto the collateral deposit account/GL is assumed to be done before the booking of the Islamic LC.

14.4.1.3 Charges

Booking (From Customer Account)

Role Amount Tag Debit / Credit
CHG_CUST_ACC CHARGES Dr
CHG_INC CHARGES Cr

 

Booking (From Receivable Account)

Role Amount Tag Debit / Credit
CHG_REC CHARGES Dr
CHG_INC CHARGES Cr

 

On Receipt (For booking Under Receivable Account)

Role Amount Tag Debit / Credit
CHG_CUST_ACC CHARGES Dr
CHG_REC CHARGES Cr

 

14.4.1.4 Commission

In Advance (Non - Accrual - On Booking)

Role Amount Tag Debit / Credit
COMM_CUST_ACC COMMSN Dr
COMM_INC COMMSN Cr

 

In Advance (Accrual - On Booking)

Role Amount Tag Debit / Credit
COMM_CUST_ACC COMMSN Dr
COMM_PAY COMMSN Cr

 

In Advance (Month-End Accrual)

Role Amount Tag Debit / Credit
COMM_PAY COMMSN Dr
COMM_INC COMMSN Cr

 

In Arrears (Non - Accrual - On Booking)

No Entries For Booking

In Arrears (Non - Accrual - On Receipt)

Role Amount Tag Debit / Credit
COMM_CUST_ACC COMMSN Dr
COMM_INC COMMSN Cr

 

In Arrears (Accrual - On Booking)

No Entries For Booking

In Arrears (Month - End Accrual)

Role Amount Tag Debit / Credit
COMM_REC ACCR_COMMSN Dr
COMM_INC ACCR_COMMSN Cr

 

In Arrears (On Receipt of Commission)

Role Amount Tag Debit / Credit
COMM_CUST_ACC COMMSN Dr
COMM_REC COMMSN Cr

 

14.4.2 Accounting Roles for Transfer of Charge & Commission Components from Islamic LC to BC

Here, Islamic LC_COMM component and Islamic LC_CHG component are defined in the Islamic LC product where the Collect Islamic LC Commission in Bills option is checked.

Accounting Role Description
LC_CHG_RECV Islamic LC Charges Receivable
LC_COM­M_RECV Islamic LC Commission Receiva­ble

 

14.4.3 Accounting Entries for Transfer of Charge & Commission Components from Islamic LC to BC

Dr/Cr Accounting role Amount tag propagated from Islamic LC
Dr LC_COM­M_RECV LC_COMM_LIQD
Cr LC_COMM_INC LC_COMM_LIQD
Dr LC_CHG_RECV LC_CHG_LIQD
Cr LC_CHG_INC LC_CHG_LIQD

In case of Islamic LC products you have to set up accounting to liquidate commission and charges onto the income GL from receivable GL.

If the accounting role for the DR leg of the accounting entries is setup as customer role, the same is recovered from the customer and gets tracked for transfer to Bills. If realization of income is not expected to happen on CLIQ, you need not setup any accounting entries in the CLIQ event and the income entries can be setup from Bills. The system allows Islamic LC products to be saved without any accounting entries defined in the CLIQ event if the options ‘Collect Islamic LC commission in Bills’ and ‘Collect Islamic LC charges in Bills’ for all the associated Charge and commission components are checked.

14.4.4 Collateral Bridge Accounting Role

Accounting role Description
LC_BC_COL­L_BRIDGE Collateral bridge between Islamic LC and Bills

This accounting role is used to transfer the collaterals from the Islamic LC onto the Bill. This role maps onto the GL/Account maintained as a part of the Islamic LC product preference.

14.4.5 AVAL: Availment under Islamic LC

Liability

Role Amount Tag Dr/ Cr
IL_OCU AVAIL_SET_AMT Cr
IL_OCU_OFFSET AVAIL_SET_AMTEQ Dr
IL_OCU ADV_LIAB_AVAIL_AMT Cr
IL_OCU_OFFSET ADV_LIAB_AVAIL_AMT Dr
IL_CNF_OFF CNF_LIAB_AVAIL_AMT Dr
IL_CNF CNF_LIAB_AVAIL_AMT Cr

 

Collateral (If Any)

Role Amount Tag Debit / Credit
COLL_CUST_ACC COLL_AMNDAMT Cr
LC_COLL_ACCT COLL_AMNDAMTEQ Dr
LCCOLL_INT_ACCT COLL_AVLAMT Dr
LC_BC_COLL_BRIDGE COLL_AVLAMTEQ Cr

 

14.4.6 CLOS: Closure of an Islamic LC / Guarantee

Liability

Role Amount Tag Debit / Credit
IL_OCU LIAB_OS_AMT Cr
IL_OCU_OFFSET LIAB_OS_AMT Dr
IL_OCU ADV_LIAB_OS_AMT Cr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Dr
IL_CNF CNF_LIAB_OS_AMT Cr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Dr

 

Collateral (If Any)

Role Amount Tag Debit / Credit
COLL_CUST_ACC COLLAMT_OS Cr
LC_COLL_ACCT COLLAMT_OSEQ Dr
LCCOLL_INT_ACCT COLLAMT_OS Dr
COL_DEPOSIT_ACC COLLAMT_OSEQ Cr

 

14.4.7 REIN: Reinstatement of an Islamic LC / Guarantee

Role Amount Tag Debit / Credit
IL_OCU LIAB_REIN_AMT Dr
IL_OCU_OFFSET LIAB_REIN_AMT Cr
IL_OCU ADV_LIAB_REIN_AMT Dr
IL_OCU_OFFSET ADV_LIAB_REIN_AMT Cr
IL_CNF CNF_ LIAB_REIN_AMT Dr
IL_CNF_OFF CNF_ LIAB_REIN_AMT Cr

14.4.8 BADV: Advising an Islamic LC

Booking Islamic LC Advice

Role Amount Tag Debit / Credit
IL_OCU ADV_LIAB_OS_AMT Dr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Cr

 

Charges

As given in event BISS.

Commission

As given in event BISS.

14.4.9 BCFM: Confirming an Islamic LC

Liability

Role Amount Tag Debit / Credit
IL_OCU LIAB_AMT Dr
IL_OCU_OFFSET LIAB_AMT Cr

 

Collateral (If Any)

Role Amount Tag Debit / Credit
COLL_CUST_ACC COLL_AMT_OS Cr
LC_COLL_ACCT COLL_AMT_OSEQ Dr

Charges

As given in event BISS.

Commission

As given in event BISS.

14.4.10 BPRE: Pre-advising an Islamic LC

None

14.4.11 BANC: Advising and Confirming an Islamic LC

Role Amount Tag Debit / Credit
IL_CNF CNF_LIAB_OS_AMT Dr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Cr

14.4.12 AMND: Amendment

Liability

Reverse all the previous entries for booking. Re-book entries based on BISS or BADV or BPRE or BANC.

Role Amount Tag Debit / Credit
IL_OCU ADV_LIAB_OS_AMT Dr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Cr
IL_CNF CNF_LIAB_OS_AMT Dr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Cr

 

Collateral (If Any)

Role Amount Tag Debit / Credit
COL_DEPOSIT_ACC COLL_AMNDAMTEQ Dr
LCCOLL_INT_ACCT COLL_AMNDAMT Cr

 

In case of decrease of collateral amount upon amendment, the system attributes the amount tags with negative amounts.

14.4.13 AOCF: Amendment from Open to Open and Confirm

None

14.4.14 APAD: Amendment from Pre-advice to Advice

None

14.4.15 APAC: Amendment from Pre-advice to Advice and Confirm

Same as For BISS

14.4.16 REVR: Reversal

Reverse out all the accounting entries booked for the contract till date.

14.4.17 ACCR: Accrual of Commission

See Commissions under event BISS.

14.4.18 CALC: Periodic Commission Calculation Date

No entries due to commission calculation.

14.4.19 CLIQ: Liquidation of Commission

See Commissions under event BISS.

14.4.20 ROPN: Reopening of an Islamic LC

Liability

Role Amount Tag Debit / Credit
IL_OCU LIAB_OS_AMT Dr
IL_OCU_OFFSET LIAB_OS_AMT Cr
IL_OCU ADV_LIAB_OS_AMT Dr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Cr
IL_CNF CNF_LIAB_OS_AMT Dr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Cr

 

Collateral (If Any)

Role Amount Tag Debit / Credit
COLL_CUST_ACC COLLAMT_OS Dr
LC_COLL_ACCT COLLAMT_OS_EQ Cr

 

14.4.21 CANC: Cancellation of an Islamic LC

Role Amount Tag Debit / Credit
IL_OCU LIAB_OS_AMT Cr
IL_OCU_OFFSET LIAB_OS_AMT Dr
IL_OCU ADV_LIAB_OS_AMT Cr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Dr
IL_CNF CNF_LIAB_OS_AMT Cr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Dr

Collateral (If Any)

Role Amount Tag Debit / Credit
LCCOLL_INT_ACCT COLLAMT_OS Dr
COL_DEPOSIT_ACC COLLAMT_OSEQ Cr

 

14.4.22 TRGN: Generation of Tracers

None

14.4.23 AATC: Amendment from Advice to Confirm

Role Amount Tag Debit / Credit
IL_OCU LIAB_OS_AMT Cr
IL_OCU_OFFSET LIAB_OS_AMT Dr
IL_OCU ADV_LIAB_OS_AMT Cr
IL_OCU_OFFSET ADV_LIAB_OS_AMT Dr
IL_CNF CNF_LIAB_OS_AMT Dr
IL_CNF_OFFSET CNF_LIAB_OS_AMT Cr

14.4.24 RASN: Reassign an Islamic LC

None

14.4.25 RAVL: Reversal of Availment

Fetch entries for last availment event and reverse them.

14.4.26 MLIQ: Manual Liquidation of Islamic LC commission

Role Amount Tag propagated from Islamic LC Dr / Cr
COMM_CUST_ACC LC_COMM_LIQD Dr
LC_COMM_RECV LC_COMM_LIQD Cr
CHG_CUST_ACC LC_CHG_LIQD Dr
LC_CHG_RECV LC_CHG_LIQD Cr

These Accounting entries are maintained when there is an Accounting entry maintained in CLIQ for transferring into Receivable. If the accounting entry is not maintained in CLIQ then the Cr Leg will be Income GL.

14.4.27 WAIV: Waiver of Components during Manual Liquidation

The amount tags for the WAI event are created upon creation of the charge and commission components. Consider Islamic LC_CHG and Islamic LC_COMM as charge and commission components defined in the system. The corresponding amount tags will be as follows:

Amount Tag Description
LC_CHG_WAIV LC Charge being waived
LC_COMM_WAIV LC Commission being waived

Accounting Entries for the Waiver event

Dr/Cr Accounting role Amount tag propagated from Islamic LC
Dr LC_COM­M_RECV LC_COMM_WAIV
Cr LC_COMM_INC LC_COMM_WAIV
Dr LC_CHG_RECV LC_CHG_WAIV
Cr LC_CHG_INC LC_CHG_WAIV

 

These accounting entries are maintained if receivable accounting entries have been maintained on the CLIQ event of the Islamic LC. The amounts for waiver will be displayed as negative amounts. Partial waivers are not allowed.