15. 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.

• Section 15.1, "Islamic LC Events"
• Section 15.2, "Amount Tags"
• Section 15.3, "Accounting Roles"
• Section 15.4, "Event-Accounting Entries"

15.1 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:

• If the contracts currency is different from the takedown or maturity accounts and neither of them is in the local currency of your branch, the cross rate entered in the contract screen is picked up.
• If the contract currency is different from the contract account and one of them is in the local currency of your branch, the exchange rate is picked up from the currency table maintained in the Core services module of Oracle FLEXCUBE. The FX spread is applied in a way that is favourable to your bank.

15.2 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

15.3 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

15.4 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:

• Section 15.4.1, "BISS: Booking of an import Islamic LC"
• Section 15.4.2, "Accounting Roles for Transfer of Charge & Commission Components from Islamic LC to BC"
• Section 15.4.3, "Accounting Entries for Transfer of Charge & Commission Components from Islamic LC to BC"
• Section 15.4.4, "Collateral Bridge Accounting Role"
• Section 15.4.5, "AVAL: Availment under Islamic LC"
• Section 15.4.6, "CLOS: Closure of an Islamic LC / Guarantee"
• Section 15.4.7, "REIN: Reinstatement of an Islamic LC / Guarantee"
• Section 15.4.8, "BADV: Advising an Islamic LC"
• Section 15.4.9, "BCFM: Confirming an Islamic LC"
• Section 15.4.10, "BPRE: Pre-advising an Islamic LC"
• Section 15.4.11, "BANC: Advising and Confirming an Islamic LC"
• Section 15.4.12, "AMND: Amendment"
• Section 15.4.13, "AOCF: Amendment from Open to Open and Confirm"
• Section 15.4.14, "APAD: Amendment from Pre-advice to Advice"
• Section 15.4.15, "APAC: Amendment from Pre-advice to Advice and Confirm"
• Section 15.4.16, "REVR: Reversal"
• Section 15.4.17, "ACCR: Accrual of Commission"
• Section 15.4.18, "CALC: Periodic Commission Calculation Date"
• Section 15.4.19, "CLIQ: Liquidation of Commission"
• Section 15.4.20, "ROPN: Reopening of an Islamic LC"
• Section 15.4.21, "CANC: Cancellation of an Islamic LC"
• Section 15.4.22, "TRGN: Generation of Tracers"
• Section 15.4.23, "AATC: Amendment from Advice to Confirm "
• Section 15.4.24, "RASN: Reassign an Islamic LC"
• Section 15.4.25, "RAVL: Reversal of Availment"
• Section 15.4.26, "MLIQ: Manual Liquidation of Islamic LC commission"
• Section 15.4.27, "WAIV: Waiver of Components during Manual Liquidation"

15.4.1 BISS: Booking of an import Islamic LC

15.4.1.1 Liability

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

15.4.1.2 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.

15.4.1.3 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

 

15.4.1.4 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

 

15.4.2 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

 

15.4.3 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.

15.4.4 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.

15.4.5 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

 

15.4.6 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

 

15.4.7 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

15.4.8 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.

15.4.9 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.

15.4.10 BPRE: Pre-advising an Islamic LC

None

15.4.11 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

15.4.12 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.

15.4.13 AOCF: Amendment from Open to Open and Confirm

None

15.4.14 APAD: Amendment from Pre-advice to Advice

None

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

Same as For BISS

15.4.16 REVR: Reversal

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

15.4.17 ACCR: Accrual of Commission

See Commissions under event BISS.

15.4.18 CALC: Periodic Commission Calculation Date

No entries due to commission calculation.

15.4.19 CLIQ: Liquidation of Commission

See Commissions under event BISS.

15.4.20 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

 

15.4.21 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

 

15.4.22 TRGN: Generation of Tracers

None

15.4.23 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

15.4.24 RASN: Reassign an Islamic LC

None

15.4.25 RAVL: Reversal of Availment

Fetch entries for last availment event and reverse them.

15.4.26 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.

15.4.27 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.