Cash a guarantee/collateral for loan

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Asnake E
Posts: 213
Joined: 02 Oct 2019, 03:28

Cash a guarantee/collateral for loan

Post by Asnake E »

Greetings,

I have one client which draw a loan from a bank.

As per the arrangement with the bank, my client pledged it's building as collateral for the loan and issued a cheque in the name of the lending bank to make up the shortage of the collateral as guarantee. Please note that the bank has now cashed the cheque, it simply holds the cheque as guarantee.

How should the issue of the cheque be accounted?

They have debited the lending bank (included in sundry receivables) and credited cash at bank for the cheque issued
Asnake E
Posts: 213
Joined: 02 Oct 2019, 03:28

Re: Cash a guarantee/collateral for loan

Post by Asnake E »

Thank you.
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