Foreign exchange accounting;

              20 HASKINS & SELLS March
Foreign Exchange Accounting
Acceptance of Draft and Delivery of Documents
IN the December issue of the B U L L E T IN
the discussion of a dollar import letter
of credit had reached the point where the
draft covering the silk shipped from Japan
had been received by the New York bank
on which it was drawn. The accompany­ing
documents had been examined and
found in order. The bank was therefore
about to accept the draft.
Acceptance is made in the usual way.
The documents are retained by the For­eign
Department and a record is made in
an acceptance register, showing date of
acceptance, the number of the letter of
credit under which the draft was drawn,
the name of the customer for whose ac­count
the letter of credit was opened, the
amount and maturity of the accepted draft.
From the acceptance register, either
through the medium of tickets or a jour­nal,
an entry is made charging "Unused
Commercial Letters of Credit" and cred­iting
"Acceptances" in the general ledger.
The purpose of this entry is to reflect the
change from contingent liabilities under
the letter of credit to actual liabilities under
the acceptance. The actual liabilities are
the obligation of the bank to the holder of
the acceptance and the promise of the im­porter
to provide the banker with funds
with which to pay the acceptance at least
one day before it matures. The acceptance
is, of course, recorded in the letter of
credit record and the amount of the accept­ance
is deducted from the balance of the
letter of credit under which it was drawn,
leaving an amount still available for drafts
which may be drawn later. In the letter
of credit record there is also recorded a
complete enumeration of the shipping
documents received and a description by
quantities, marks and numbers of the mer-