Letter of Credit (LC) Module — Complete User Workflow Documentation

Comprehensive guide covering Import LC, Export LC, system pre-seeded 34 cost types, custom create cost types, currency, tax codes, status lifecycle, field-by-field fallback analysis, return workflow, Domestic Supplementary Duty, report outputs etc and accounting regulation validation.

Table of Contents

1. System Overview
2. One-Time Setup — Before You Start
3. Import LC — Complete Workflow
4. Export LC — Complete Workflow
5. Import LC Return Workflow
6. Export LC Return Workflow
7. Domestic Supplementary Duty (SD)
8. Sample Data — Import LC (Multi-Item + FA + system pre-seeded 34 Types)
9. Sample Data — Export LC (With Fees)
10. Field-by-Field Analysis & Fallback Chains
11. Currency Configuration
12. TaxCode Requirements
13. Status Lifecycle — GL Creation Matrix
14. Reports & Output
15. Error Scenarios & What To Check

§. Accounting Regulation Validation

1. System Overview

The LC module handles two complete transaction lifecycles:

• Import Letters of Credit — Purchase goods or fixed assets from overseas suppliers through bank-financed letters of credit
• Export Letters of Credit — Sell goods to overseas buyers where the buyer's bank guarantees payment through a letter of credit

What Happens at Each Stage

2. One-Time Setup — Before You Start

2.1 Verify Chart of Accounts

Navigate to Settings > Chart of Accounts. Verify these accounts exist (they are auto-created):

2.2 LCCostTypeSettings — The 34 Pre-Seeded Cost Types

Navigate to Settings > LCSettings > LCCostTypeSettings.

The system comes with 34 pre-configured cost types organized into groups:

Each pre-seeded cost type has a fixed mapping to specific GL accounts and VAT base treatment. These mappings are relied upon by the LC posting engine, Mushak VAT reports, and financial statement generation.

IMPORTANT: Users shall NOT Edit or Delete Pre-Seeded Cost Types

The 34 pre-seeded cost types are system-configured defaults that the LC module depends on. Changing them can cause:

Correct approach: If you need a custom cost type: 1. Create a NEW cost type using the New button — give it a unique Code and Name 2. Leave the 34 pre-seeded types unchanged 3. Set IsActive = false on any pre-seeded types your business doesn't use (hides them without breaking the engine)

What you CAN safely change:

2.3 Set Up Tax Codes

Navigate to Settings > TaxCodes > New TaxCode.

Example — VAT-15% for Bangladesh imports: - Name: VAT-15% - Rate Type: CustomRate - Type: SingleRate - Rate: 15 - Account: Select your Tax Payable account

2.4 Set Up Foreign Currencies

Navigate to Settings > Currencies > New ForeignCurrency.

Example — US Dollar: - Code: USD - Name: US Dollar - Symbol: $ - Decimal Places: 2 - Exchange Rate: 110 (1 USD = 110 BDT) - Exchange Rate Is Inverse: No

3. Import LC — Complete Workflow

3.1 Create the LC Document

Navigation: Letters of Credit > New Letter of Credit

Header Fields

What Happens at Status = Opened

At Opened status, no General Ledger entries are created. The LC exists as an off-balance-sheet contingent liability. This is correct per accounting standards — no entry is made until the supplier ships goods and presents documents.

Critical Rules for Header Fields

3.2 Add Cost Lines — System pre-seeded 34 Types

After saving the LC, reopen it and add cost lines. Each cost line represents one expense component. The rules differ by cost type group.

Group A: Goods + Duties (Types 1-7) — Must Set Item and Quantity

Why: If Inventory Item is blank, the cost goes to a Suspense account. If Quantity is 0 or blank, the entire item's merge output is skipped and the cost is lost from inventory.

Example:

Goods line:  Item = Widget-X, Qty = 1000, Amount = 1,650,000, TaxCode = VAT-15%
Duty line:   Item = Widget-X, Qty = (blank), Amount = 412,500

Group B: Landed Costs (Types 8-21) — Item Is Optional

• When Item is set: Cost is directly assigned to that item's inventory layer.
• When Item is blank: Cost is proportionally allocated across all items and fixed assets based on their CIF values (per IAS 2 Section 10).

Group C: Period Costs (Types 22-31) — Item Not Needed

Group D: Tax Assets (Types 32-34) — Item Not Needed

Quick Reference: System pre-seeded 34 Cost Types

• Landed costs without an item are proportionally allocated by CIF value across all inventory items and fixed assets.

Adding the Fixed Asset Type

If you are importing a Fixed Asset (e.g., machinery), use the FixedAsset field on the cost line instead of InventoryItem:

The system posts to FixedAssetsAtCostAccount instead of InventoryOnHand. Shared landed costs (freight, insurance with no item) are proportionally allocated to Fixed Assets as well.

Duties and VAT for Fixed Assets

When duties (Customs Duty, Supplementary Duty, Regulatory Duty etc.) are entered for a Fixed Asset, the system automatically includes them in the VAT base. Per NBR VAT Act 2012 Section 4(2), the VAT base is the Assessable Value = CIF value plus all customs duties.

Duty lines may be entered in any order — before or after the CIF line. The system handles this by scanning all cost lines before processing the CIF line, ensuring duties are included in the VAT base regardless of their position in the list. Duty TaxCodes are not processed separately — duties feed into the VAT base calculation only (Customs Act 1969 Section 25).

3.3 Status → DocumentsPresented — GL Entries Created

Change the status from Opened to DocumentsPresented. This is the moment when all General Ledger entries are posted.

What Happens Internally

1. Costs are grouped by inventory item — A "merge bucket" is created for each item
2. CIF + all duties merge — Single consolidated cost layer per item (e.g., CIF $15,000 + CD $3,750 + SD $1,500 = $20,250 per item)
3. Landed costs without an item are pro-rata allocated — Split across all items and fixed assets by CIF weight
4. Period costs go to P&L — Direct expense entries
5. Tax assets go to Balance Sheet — AdvanceIncomeTax account
6. VAT is calculated — Based on CIF + all duties (for duties marked as VAT-inclusive)
7. Total is computed — Sum of all debit entries
8. Total is split into liabilities — Accounts Payable (margin + other costs) + Letter of Credit Payable (financed portion)
9. Balancing entries are created — Guaranteeing DR = CR

The GL Entry Pattern

Dr   InventoryOnHand (per item, merged CIF+Duties+Landed)     XX,XXX
Dr   TaxReceivable (VAT on CIF+Duties)                         X,XXX
Dr   LCExpense (period costs: commission, bank fees, etc.)      X,XXX
Dr   InterestExpense                                             X,XXX
Dr   AdvanceIncomeTax (AIT + AT + WHT)                          X,XXX
  Cr  AccountsPayable (margin % + other costs)                           XX,XXX
  Cr  LetterOfCreditPayable (financed portion)                           XX,XXX
                                                               -------- --------
                                                     Total DR = Total CR ✅

After Posting — What Changed on Financial Statements

3.4 Payment Options

After DocumentsPresented, the LC View shows a New Payment button. You have several options.

Option A — Full Payment via New Payment

The system pre-fills the payment form with: - Supplier = LC Supplier - Amount = Total outstanding (AP + LCP)

When saved:

Dr  AccountsPayable           Full AP amount
Dr  LetterOfCreditPayable     Full LCP amount
  Cr  Bank Account                          Total amount

After this, the LC View shows: Outstanding = 0, Payment Status = Fully Paid.

Option B — Partial Payment

Change the pre-filled amount to a lower value:

Dr  AccountsPayable           10,00,000
  Cr  Bank Account                       10,00,000

The remaining outstanding is automatically calculated. The New Payment button reappears with the reduced amount.

Option C — Payment via Journal Entry

Create a Journal Entry with: - Check Is LC Adjustment = Yes - Select the Letter of Credit - Line 1: Dr AccountsPayable / Cr Cash

The LC View tracks these Journal Entries and includes them in the outstanding balance calculation.

Option D — Delete a Payment

Delete the Payment document — the system reverses the payment's GL entries — outstanding balance returns to its original amount. Accrual history records are not affected.

Important — Correct Account Setup for LC Payments

When paying an Import LC, choose the right account:

• Paying your margin and other costs → use Accounts Payable
• Paying the bank-financed portion → use Letter of Credit Payable

Always use these two system accounts. Users shall not pick custom accounts for LC Payments. The LC View only recognises these two. Payments posted to other accounts will NOT show up in the LC View and will NOT reduce the outstanding balance displayed there.

Currency:

Enter all payment amounts in base currency (Say if user set BDT in Settings > Currencies > Base Currency it will be BDT). Leave the Currency field empty. Payment lines always hold BDT amounts regardless of the LC's own currency. If the LC uses a foreign currency, the LC View will convert the BDT amount automatically.

Example — LC in USD with exchange rate 110: * Payment line amount = 1,00,000 (in BDT) * The LC View shows: -1,00,000 @ 110    -909.09 USD

The BDT amount and rate appear on the left; the converted amount on the right. If the LC has no foreign currency set, no rate or conversion appears.

How payments appear in the LC View:

All payments, adjustments, and accruals appear together in one running list:

Total Payable:                        35,85,725
Payment: PMT-001  (6/20/2026)       -24,30,725    ← negative (reduces payable)
Payment: PMT-002  (6/25/2026)       -11,55,000    ← negative (reduces payable)
*Accrue Interest: ACCRUAL-LC-...         9,625     ← positive (adds cost)
     ৳ 9,625 @ 110      87.50                       ← rate shown when foreign currency set
Outstanding:                                  0

Payments and non-accrual adjustments appear as negative. Interest accruals appear as positive (they add cost). Accrual entries do NOT affect the outstanding balance.

Linking a payment to the LC:

When you click "New Payment" from the LC View, the system links the payment automatically. If you create a Payment manually from the Payments screen, make sure the Letter of Credit field on each payment line points to the correct LC. Without this link the payment will be invisible to the LC View.

Paying via Journal Entry:

When recording a payment through a Journal Entry instead of the Payment form: * Check Is LC Adjustment = Yes * Select the Letter of Credit * Use Accounts Payable or Letter of Credit Payable as the line account (same rules as above) * Enter a debit in base currency (BDT) * Leave the Currency field empty

The LC View tracks this Journal Entry alongside regular payments when calculating the outstanding balance. For single payments, use only a Dr side for the payment (not both Dr and Cr in the same JE).

3.5 Interest Accrual

If the LC has: - A Maturity Date set - An Interest Rate > 0 - Outstanding balance > 0

...the Accrue Interest button appears.

How Interest Is Calculated

Interest = FinancedPortion x InterestRate% x Days / DayCountBasis

Where: - FinancedPortion = LC Amount x (100 - Margin%) / 100 - Days = Number of days since last accrual (or LC date if first accrual) - DayCountBasis = 360 (30/360) or 365 (actual/365)

Journal Entry for Accrual

Dr  InterestExpense                          XX,XXX
  Cr  LCAccrualInterestPayable                          XX,XXX

A history record is created linking the accrual to the Journal Entry, ensuring a proper audit trail. The system checks that all previous accruals have valid Journal Entries by walking the chain forward. If a journal entry was deleted or modified (broken chain), the system shows: "Accrual chain broken at {date} — journal entry was deleted or modified. Re-accruing from {lastValidDate}. Future accrual entries after {date} are now orphaned — please delete them manually if needed. Use the Reset Accrual button on the LC View to start fresh." The orphaned records are automatically cleaned up before creating new accruals.

When Accrual Won't Work

How Accruals Appear in the LC View

The LC View shows all payments, adjustments, and accruals together in one list. Accruals are displayed differently from payments:

1. Label — Accruals are marked with an asterisk (*): *Accrue LC Interest: ACCRUAL-LC-2026-001-20260626 (6/26/2026)

2. Sign — Accrual amounts appear as positive while payments and non-accrual adjustments appear as negative. This is because accruals add to the total cost (interest expense), while payments reduce the outstanding balance.

3. Outstanding balance — Accrual entries do not reduce the outstanding balance. Only actual payments against Accounts Payable and Letter of Credit Payable affect the outstanding calculation. Interest is a borrowing cost, not a repayment of principal.

Example — LC View after payment and one accrual:

Total Payable:                        35,85,725
Payment: PMT-001  (6/20/2026)       -24,30,725    ← negative
Payment: PMT-002  (6/25/2026)       -11,55,000    ← negative
*Accrue Interest: ACCRUAL-LC-...         9,625     ← positive (adds cost)
     ৳ 9,625 @ 110      87.50                       ← rate shown when foreign currency set
Outstanding:                                  0    ← accrual excluded

Even though "Outstanding" is zero, the interest entry remains visible. This is correct because interest is a borrowing cost — it does not repay principal.

Foreign Currency Display

When the LC has a foreign currency, the exchange rate appears alongside each accrual:

*Accrue Interest: ACCRUAL-LC-... (date)
    ৳ 9,625 @ 110      87.50

The BDT amount and rate are on the left. The converted amount in the LC's foreign currency is on the right. If no foreign currency is set, no rate or conversion appears.

Impact on Other Features

• The New Payment button is determined by the outstanding balance excluding accruals. Accrual entries do not affect whether the button appears.
• For Export LCs, the Export LC Receipt form also excludes accrual entries when pre-filling the receipt amount.
• When the outstanding balance (excluding accruals) reaches zero, the Accrue Interest button hides. Historical accruals remain visible in the LC View — they are not reversed.

──────────────────────────────────────────────────────────── Why Accruals Don't Reduce the Outstanding Balance ────────────────────────────────────────────────────────────

An interest accrual entry: Dr InterestExpense 9,625 Cr LC Accrual Interest Payable 9,625

This entry: ✓ Records the cost of borrowing ✓ Creates a liability (accrued interest) ✗ Does NOT repay any part of the original LC amount

The outstanding balance tracks how much of the original LC principal remains unpaid. Interest is a separate cost — it adds to total expense but does not reduce what you owe on the principal.

Think of it like a credit card statement: - The purchase amount (principal) is what you owe the bank - The interest charge is a fee for borrowing - Paying the interest does NOT reduce the purchase amount - You must pay the principal separately to clear the debt

In the LC View: Total Payable = original cost (principal) + VAT + fees Payments = amounts paid toward the principal Accruals = interest costs shown separately Outstanding = Total Payable minus Payments (accruals are excluded) ────────────────────────────────────────────────────────────

3.6 Status → Paid / Closed

Warning: Changing from DocumentsPresented to any other status will reverse all GL entries. The system shows a warning: "This LC has {N} linked transaction(s). Changing the status will reverse the LC entries but the linked transactions will remain as orphans. Delete the linked transactions first for a clean reversal." The same warning applies to Export LC with the same pattern. Review linked documents before proceeding.

4. Export LC — Complete Workflow

4.1 Create Export LC

Navigation: Export Letters of Credit > New Export Letter of Credit

Fee Lines

Add bank fees that reduce the net receivable:

4.2 Status → DocumentsShipped — GL Created

Change status from Opened to DocumentsShipped.

What Happens

Dr  ExportLCReceivable (Bank)          Full LC Amount      (receivable from bank)
Dr  LCExpense (Fees)                   Total fees          (bank charges to P&L)
  Cr  ExportLCReceivable                               Total fees (reduces receivable)
  Cr  ExportLCARClearing                             Full LC Amount (temporary liability)

After posting: - ExportLCReceivable = LC Amount minus Fees = Net Receivable - ExportLCARClearing = Full LC Amount (temporary) - Sales Invoice = Remains UNPAID (the clearing account holds the credit)

What the Export LC View Shows

After DocumentsShipped:

LC Amount:                    55,00,000
Total Fees:                      96,250
Net Receivable:               54,03,750
Status:                       DocumentsShipped
[Accrue Interest] [Reset Accrual] [Receive Payment]

4.3 Receive Payment Options

Option A — Click Receive Payment Button

The system pre-fills: - Customer = Export LC Customer - Amount = Net Receivable (e.g., 54,03,750) - Export Letter of Credit = auto-linked

Full Receipt:

Cr  ExportLCReceivable          54,03,750    (clears receivable)
Dr  ExportLCARClearing          55,00,000    (clears clearing)
Cr  AccountsReceivable (SI)     55,00,000    (clears SI)
Dr  Cash (Bank Account)         54,03,750    (cash received)

After these entries, all accounts are zero:

Partial Receipt: Change amount to a lower value (e.g., 50,000) — same 4-entry pattern at the reduced amount. Outstanding ExportLCReceivable remains; SI stays UNPAID.

Option B — Receipt via Journal Entry

Create a Journal Entry with: - Check Is Export LC Adjustment = Yes - Select the Export Letter of Credit - Same 4-entry pattern as the receipt

The Export LC View tracks Journal Entries in the outstanding balance.

Option C — Delete a Receipt

Delete the ExportLCReceipt document — all 4 entries are reversed — AR is restored to UNPAID.

Important — How Receipts and Adjustments Appear in the Export LC View

All receipts, adjustments, and accruals appear together in one running list:

Net Receivable:                    54,03,750
Receipt: RCPT-001  (6/30/2026)   -54,03,750    ← negative (reduces receivable)
JE: ADJ-001      (7/5/2026)        -96,250     ← negative (residual clearing)
*Accrue Interest: ACCRUAL-ELC-...     9,625     ← positive (adds to receivable)
     ৳ 9,625 @ 110      87.50                    ← rate shown when foreign currency set
Outstanding:                           -96,250

Receipts and non-accrual adjustments appear as negative (they reduce the receivable). Interest accruals appear as positive (they add to the receivable). Accrual entries do NOT affect the outstanding balance.

Recording a receipt via Journal Entry:

If you record a receipt through a Journal Entry instead of the Export LC Receipt form: * Check Is Export LC Adjustment = Yes * Select the Export Letter of Credit * Use ExportLCReceivable or ExportLCARClearing as the line account * Enter amounts in base currency (BDT) * Leave the Currency field empty

The Export LC View will convert amounts automatically if the ELC has a foreign currency.

4.4 Residual Clearing

After a full receipt, there is typically a residual amount equal to the total fees. This is because ExportLCReceivable was reduced by fees at DocumentsShipped, but ExportLCARClearing and AR were created at the full LC Amount.

To clear the residual, create a Journal Entry:

Dr  ExportLCARClearing         96,250    (clears remaining clearing)
  Cr  AccountsReceivable (SI)           96,250    (clears remaining AR)

After this JE, all accounts are zero.

4.5 Closing the Export LC

Change status to Closed — all GL entries are reversed. Only do this when: - The bank has fully paid - Any residual has been cleared - The export transaction is fully complete

4.6 ExportLCReceipt — Dedicated Receipt Document

The ExportLCReceipt is a dedicated transaction document used to record cash received from the bank against an Export Letter of Credit. It creates 4 General Ledger entries that clear the ExportLCReceivable, ExportLCARClearing, Accounts Receivable, and record the cash received.

Creating an ExportLCReceipt

Navigation: From the Export LC View, click the Receive Payment button. Or navigate directly to Export LC Receipts > New Export LC Receipt.

Form Pre-Fill Behavior

When created from the Export LC View (via the Receive Payment button), the form pre-fills:

Partial Payment Remaining Calculation:

alreadyPaid  = sum of all prior ExportLCReceipt.Amount for this ELC     (in ELC currency)
             + sum of non-accrual JE lines for IsExportLCAdjustment JEs

remaining = Max(0, netReceivable - alreadyPaid)
form.Amount = remaining

JE lines excluded from alreadyPaid: Interest expense and accrued interest payable entries do NOT reduce the receivable. They represent borrowing costs (IAS 23 Section 8), not payments received. Only adjustments that affect the ExportLCReceivable account are counted.

Currency conversion: When the ELC has a foreign currency, JE amounts (in BDT) are converted to the ELC's currency using the exchange rate. When no foreign currency is set, amounts stay in BDT regardless of the exchange rate value.

This means: - Each subsequent receipt shows the remaining outstanding amount - Both prior ExportLCReceipts AND Journal Entries (IsExportLCAdjustment) are counted - Accrual entries are excluded from the calculation - If fully paid, remaining = 0 and the button hides

Overpayment Warning

If the user enters an amount greater than the net receivable, a yellow warning is shown with the actual message from the codebase:

Amount exceeds the outstanding net receivable of 54,03,750 for Export LC ELC-2026-001. The Export LC Receivable account will show a negative balance.

GL entries are still created — the overpayment causes the ExportLCReceivable to go negative, which should be corrected with a separate Journal Entry. The warning advises the user of the negative balance consequence.

The 4 GL Entries — Detailed Analysis

When saved, ExportLCReceipt creates 4 entries in this specific order:

Entry 1 — Cr ExportLCReceivable (reduces the bank receivable)

Amount: -Receipt.Amount (negative = credit)
Account: BalanceSheetExportLCReceivableAccount
Purpose: Reduces the receivable from the bank by the amount received
exportLetterOfCredit: ELC Key (links to Export LC for tracking)

Entry 2 — Dr ExportLCARClearing (reduces the temporary liability)

Amount: +Receipt.Amount (positive = debit)
Account: BalanceSheetExportLCARClearingAccount
Purpose: Reduces the temporary clearing liability created at DocumentsShipped
exportLetterOfCredit: ELC Key

Entry 3 — Cr AccountsReceivable (clears customer's invoice balance)

Amount: -Receipt.Amount (negative = credit)
Account: BalanceSheetAccountsReceivableAccount
Customer: from receipt's Customer field
SalesInvoice: linked SI from the Export LC
Purpose: Marks the Sales Invoice as partially/fully paid
exportLetterOfCredit: ELC Key

Entry 4 — Dr CashAtBank (records cash received)

Amount: +Receipt.Amount (positive = debit)
Account: BalanceSheetCashAtBankAccount
BankAccount: the bank account selected on the receipt
Purpose: Records the actual cash deposited into the bank
exportLetterOfCredit: ELC Key

Complete GL for Full Receipt (54,03,750):

Cr  ExportLCReceivable                   54,03,750   (clears receivable)
Dr  ExportLCARClearing                   55,00,000   (clears clearing — full LC amount)
Cr  AccountsReceivable (SI)              55,00,000   (clears SI — full LC amount)
Dr  Cash (Bank Account)                  54,03,750   (cash received = net amount)
                                           --------   --------
Total Dr: 1,09,03,750   Total Cr: 1,09,03,750  DR=CR

Note the asymmetry: The ExportLCARClearing and AR entries use the full LC Amount (55,00,000), while ExportLCReceivable and Cash use the net receivable (54,03,750). This imbalance equals the total fees (96,250) and is resolved by clearing the residual.

Full vs Partial Receipt Behavior

The Fee Residual Explained

After a full receipt, these account balances remain:

The 96,250 residual equals the total fees. This is because: - At DocumentsShipped: Fees reduced ExportLCReceivable but NOT ExportLCARClearing or AR - At Receipt: Receipt amount = LC Amount - Fees, which proportionally clears all accounts - The remaining 96,250 in Clearing and AR equals the fees

Resolution: Create a Journal Entry to clear the residual:

Dr  ExportLCARClearing    96,250
  Cr  AccountsReceivable           96,250
-> All accounts = 0

Architectural Note: The design decision was to leave the residual for the user to handle via a separate JE, giving them visibility into the clearing process rather than hiding it.

If the Export LC has a foreign currency, the clearing Journal Entry appears in the Export LC View with the exchange rate:

JE: ADJ-001 (7/5/2026) ৳ 96,250 @ 110 -$875.00

Currency Conversion Behavior

The receipt gets its currency from the linked Export Letter of Credit, not from its own fields:

Cleared / ClearDate Fields

The ExportLCReceipt model has two fields for bank reconciliation: - Cleared (bool): Whether the bank has confirmed this receipt - ClearDate (DateTime?): When the bank cleared it

ExportLCReceipt List View

Navigation: Export LC Receipts

Columns:

Each receipt is clickable — opens the ExportLCReceipt View showing full details with drill-down to the linked Export LC.

5. Import LC Return Workflow

When you need to return goods imported via LC, you cannot simply reverse the LC because three different parties received payments:

5.1 Why Three Transactions Are Needed

When an LC is posted, the costs merge into a single inventory layer. For example:

• CIF value ($15,000) was paid to the supplier
• Duties ($10,065) were paid to customs
• VAT ($3,985) was paid to the tax authority
• AIT ($2,753) was paid to the tax authority
• Bank fees ($405) were paid to the bank — these are sunk costs (not recoverable)

A single DebitNote would only reverse the supplier portion. The duties and taxes require separate recovery from the tax authority.

5.2 Step 1 — DebitNote: Return Goods to Supplier

Create a DebitNote against the supplier for the CIF value only.

Item: Widget-X, Qty: 1,000, Amount: 16,50,000 (CIF value — NOT full landed cost)

Why only CIF?: The supplier is only responsible for the goods value. Duties and taxes were paid to the government, not the supplier.

After this entry: - Inventory layer is partially consumed (remaining = duties + landed costs) - Accounts Payable is reduced by CIF value

VAT Reporting: This DebitNote will appear in Mushak 6.8 — Debit Note report (see Section 14.8), where it is compared against the original PurchaseInvoice. The report will show the PI amount as the full landed cost (28,69,250) and the DN amount as the CIF value only (16,50,000). The VAT and SD differences reflect that those amounts are recovered separately via Journal Entry (Step 2), not through the DebitNote.

5.3 Step 2 — Journal Entry: Recover Duties & Taxes

Create a Journal Entry to reclassify duties and taxes as receivables from the tax authority:

Dr  Customs Duty Receivable (new BS Asset)         10,06,500    (duties refundable)
  Cr  InventoryOnHand                                            10,06,500    (remove duties from inventory)

For VAT and Advance Income Tax:

Dr  Tax Receivable — VAT reversal                   3,98,475
Dr  Advance Income Tax reversal                     2,75,250
  Cr  InventoryOnHand                                            6,73,725

After this entry: Inventory is zero (all costs removed). Receivables from customs/tax authority are created.

Note: This Journal Entry does not appear in Mushak 6.8 — it is not a DebitNote. Mushak 6.8 only documents the physical return of goods to the supplier (Step 1 — DebitNote). Duty and tax recovery is a separate accounting process with the customs authority.

5.4 Step 3 — Payment: Repay Bank Financing

If the bank has been paid, no action is needed. If the financed portion is still outstanding:

Dr  LetterOfCreditPayable    11,55,000
  Cr  Cash/Bank Account                 11,55,000

5.5 Full Return Sample

Scenario

Original LC:

Widget-X:     1,000 units @ $15 CIF = $15,000 (BDT 16,50,000)
Duties:       CD 4,12,500 + RD 49,500 + SD 4,12,500 + CVD 82,500 + ADD 33,000 + SFG 16,500
              = BDT 10,06,500
Landed Costs: FRT 50,000 + INS 8,250 + ... = BDT 2,12,750
VAT:          BDT 3,98,475 (15% on 26,56,500)
AIT+AT+WHT:   BDT 2,75,250
Period Costs: BDT 40,500 (sunk — not recoverable)
Margin:       30% -> AP 24,30,725 / LCP 11,55,000

Return Transactions

Step 1 — DebitNote (Return goods to supplier):

Item: Widget-X, 1,000 units, Amount: 16,50,000 (CIF only)
Result: AccountsPayable reduced by 16,50,000

Step 2 — Journal Entry (Recover duties and taxes):

Dr  Customs Duty Receivable (new BS Asset)        10,06,500
Dr  VAT Receivable Adjustment                      3,98,475
Dr  Advance Income Tax Receivable                  2,75,250
  Cr  AccountsPayable                                         5,45,475  (duties portion in AP)
  Cr  InventoryOnHand                                         11,34,750  (remaining inventory)

Step 3 — Payment (Repay bank):

Dr  LetterOfCreditPayable     11,55,000
  Cr  Cash/Bank Account                  11,55,000

Result After Return

5.6 Partial Return Sample

If only 500 of 1,000 units are returned:

Step 1 — DebitNote:

Item: Widget-X, 500 units, Amount: 8,25,000 (50% of CIF)

Step 2 — Journal Entry (50% of duties and taxes):

Dr  Customs Duty Receivable        5,03,250
Dr  VAT Receivable Adjustment      1,99,238
Dr  Advance Income Tax Receivable  1,37,625
  Cr  InventoryOnHand                         8,40,113

Step 3: Remaining 500 units stay in inventory at the original landed cost.

5.7 Important Notes on Returns

What the LC View Shows After a Return

The Import LC View does not change when you create a DebitNote or Journal Entry for a return. It continues to show the original data:

Total Payable:                        35,85,725
Payment: PMT-001  (6/20/2026)       -24,30,725
Payment: PMT-002  (6/25/2026)       -11,55,000
Outstanding:                                  0    (Fully Paid)

This is by design — the LC View records the LC's own lifecycle. Return transactions are separate business events that happen outside the LC.

Unrecoverable Costs

After removing the goods value (CIF 16,50,000) through the DebitNote and the duties (10,06,500) and taxes (3,98,475 + 2,75,250) through Journal Entries, any remaining landed costs (2,12,750 for freight, insurance, port charges, etc.) may not be recoverable from any party. These costs were paid to third parties (shipping lines, insurers, port authorities) and must be written off as an expense.

Check Your Quantities

If a goods line on the LC has a quantity of zero, the system will not create an inventory entry for that item. Always set a quantity greater than zero on goods lines.

6. Export LC Return Workflow

When you issue a Credit Note against a Sales Invoice that was financed by an Export LC, the approach depends on timing.

6.1 Case A — Credit Note Before ExportLCReceipt

Scenario: Customer returns goods before the bank has paid.

Step 1 — Issue Credit Note to reduce the Sales Invoice by the returned amount:

Dr  Revenue Account         1,00,000    (reduce revenue)
  Cr  AccountsReceivable               1,00,000    (reduce AR)

VAT Reporting: This Credit Note will appear in Mushak 6.7 — Credit Note report (see Section 14.7), where it is compared against the original SalesInvoice. For export sales (zero-rated), both the SI and CN sides show 0% VAT.

Step 2 — The Export LC Receipt will naturally be for the reduced amount.

Export LC Receipt for 53,03,750 (reduced by 1,00,000)
-> SI marked PAID, all accounts zero

6.2 Case B — Credit Note After ExportLCReceipt

Scenario: Customer returns goods after the bank has already paid.

Step 1 — Issue Credit Note for 1,00,000:

Dr  Revenue Account         1,00,000
  Cr  AccountsReceivable               1,00,000

VAT Reporting: This Credit Note will appear in Mushak 6.7 — Credit Note report (see Section 14.7), showing the original SI amounts vs the CN amounts side-by-side. The VAT and SD on the CN should proportionally match the SI to properly reverse the tax position.

Step 2 — Clear the residual in ExportLCARClearing and AR:

Dr  ExportLCARClearing    1,00,000
  Cr  AccountsReceivable           1,00,000

After this JE: All accounts return to zero.

6.3 Export LC Fee Correction

If bank fees were entered incorrectly, adjust via Journal Entry: - Check Is Export LC Adjustment = Yes - Select the Export Letter of Credit - Line: Dr ExportLCARClearing / Cr ExportLCReceivable (for the correction amount)

6.4 Important Notes on Returns

Making a Journal Entry Visible

If you create a Journal Entry to record the return (other than the CreditNote), it must have: * Is Export LC Adjustment set to Yes * The Export Letter of Credit selected

Without both settings, the entry will NOT appear in the Export LC View and will NOT affect the outstanding balance.

Bank Fees Are Not Refundable

The bank fees (96,250 in this example) are service charges for processing the LC. The bank provided this service regardless of whether the goods were later returned. These fees remain in your Profit & Loss statement as an expense. Only the commercial part of the transaction (the sale) is reversed through the CreditNote.

Foreign Currency

If the Export LC has a foreign currency, amounts are converted using the exchange rate and the rate is shown alongside each entry. If no foreign currency is set, amounts stay in the base currency regardless of the exchange rate value.

7. Domestic Supplementary Duty (SD)

7.1 What Is Domestic SD?

Domestic Supplementary Duty (SD) is an additional excise-type duty applied to certain goods sold or purchased within the local market (not on imports). It applies to:

• Luxury goods (e.g., electronics, cosmetics, branded apparel)
• Demerit goods (e.g., tobacco, alcohol, sugary drinks)
• Specific services (e.g., telecom, banking, insurance)

Unlike Import SD (which capitalizes to inventory), Domestic SD is a liability — it is collected from customers and paid to the tax authority.

7.2 Domestic SD on Sales

Scenario: You sell goods subject to 20% Supplementary Duty.

Invoice Line: Item = TV, Qty = 10, Unit Price = 50,000
Subtotal: 5,00,000
SD 20%:   1,00,000    (5,00,000 x 20%)
Total:    6,00,000

GL Posting:

Dr  AccountsReceivable                  6,00,000
  Cr  Revenue Account                      5,00,000
  Cr  DomesticSupplementaryDutyPayable     1,00,000    (liability)

The Domestic Supplementary Duty Payable is a Balance Sheet liability — it represents SD collected from customers that must be remitted to the tax authority.

7.3 Domestic SD on Purchases

Scenario: You purchase goods subject to 20% Supplementary Duty from a local supplier.

Invoice Line: Item = Raw Material, Qty = 100, Unit Price = 1,000
Subtotal: 1,00,000
SD 20%:     20,000
Total:    1,20,000

GL Posting:

Dr  Expense/Asset Account              1,00,000
Dr  DomesticSupplementaryDutyPayable      20,000    (input SD — reduces liability)
  Cr  AccountsPayable                           1,20,000

7.4 Local Purchase via LC (Domestic LC)

While LCs are typically used for international trade, they can also be used for local purchases where a bank guarantee is required.

Workflow for Local LC Purchase with SD

Example: Purchase raw materials locally via LC. The goods have 15% SD.

Step 1 — Create the Local Purchase LC:

Supplier: Local Supplier (BDT)
LC Amount: 2,00,000 (base currency)
Margin: 20% (80% bank financing)
TaxCode: Not needed (VAT handled separately)

Step 2 — Cost Lines (no foreign currency):

Line 1:  Goods, Item=Raw Material-Y, Qty=500, Amount=2,00,000
Line 2:  SD (use a local SD cost type), Amount=30,000 (15% x 2,00,000)
Line 3:  Commission, Amount=5,000
Line 4:  Interest, Amount=3,000

Step 3 — DocumentsPresented — GL Entries:

Dr  InventoryOnHand (Raw Material-Y)       2,00,000   (goods only)
Dr  DomesticSupplementaryDutyPayable          30,000   (SD liability — reduces what you owe)
Dr  LCExpense (Commission+Interest)            8,000   (period costs to P&L)
  Cr  AccountsPayable (20% margin+other)              1,00,000
  Cr  LetterOfCreditPayable (80% financed)             1,38,000
                                               --------  --------
                                     Total:   2,38,000   2,38,000 DR=CR

Note: SD on a local purchase is treated as a reduction of SD liability (like input VAT), not as a capitalized cost. This is because Domestic SD is a pass-through tax, not a cost of bringing inventory to its present location.

Key Difference: Import SD vs Domestic SD

7.5 Domestic SD Transaction Line Behavior

When you create a Sales Invoice, Purchase Invoice, Debit Note, or Credit Note and select DomesticSupplementaryDutyPayable as the line account, a special field called SDInventoryItem appears automatically. This field lets you link the SD line to a specific inventory item or fixed asset for reporting purposes.

How SD Works in Each Transaction Type

Behavior for Inventory Items vs Fixed Assets

Domestic SD is a pass-through tax liability, NOT a capitalized cost. This is a critical distinction from Import SD (which capitalizes to inventory). Domestic SD behaves identically regardless of whether the underlying item is inventory or a fixed asset:

Key rule: The SD amount is recorded as a liability change, not a cost. It does not increase or decrease the inventory layer or fixed asset value. SD is: - Collected from customers (Cr SD Payable) on sales - Paid to suppliers/tax authority (Dr SD Payable) on purchases - The net balance of DomesticSupplementaryDutyPayable = amount owed to (or receivable from) the tax authority

The SDInventoryItem vs Regular Item Field

Each transaction line has two separate item fields:

Example — Sales Invoice with both Item and SD:

Line 1: Item = LCD TV, Account = Revenue, Qty = 5, Amount = 4,00,000
Line 2: Account = DomesticSupplementaryDutyPayable, SDInventoryItem = LCD TV, Amount = 80,000

GL:
  Dr  AccountsReceivable                      4,80,000
    Cr  Revenue (LCD TV)                                 4,00,000
    Cr  DomesticSupplementaryDutyPayable                    80,000

Result: Revenue = 4,00,000 (correct — SD is NOT revenue)
        SD Payable = 80,000 (correct — liability to tax authority)
        Inventory movement: LCD TV 5 units sold at cost (SD does not affect COGS)

How SD Lines Are Identified for Reporting

The system identifies Domestic SD lines by checking if the line's Account GUID matches BalanceSheetDomesticSupplementaryDutyPayableAccount. When found, the line is classified as SD for: - Mushak 6.2: VAT return — SD component shown separately from VAT - Mushak 6.3: Supplementary Duty report — per-item SD breakdown using SDInventoryItem - Mushak 6.6: Purchase/Sales summary — SD classified alongside regular transactions

The SDInventoryItem field enables the system to: 1. Calculate the effective SD rate per item (SD Amount / Item Value) 2. Report per-item SD totals for customs and tax audits 3. Proportionally allocate unassigned SD across items

7.6 SD Reporting (Mushak)

The system provides Supplementary Duty reporting for Mushak VAT compliance. This:

1. Scans all Import LCs in a date range to compute the SD rate for each imported item
2. Calculates SD rate = Total SD Amount / Total CIF Amount (as a percentage)
3. Provides per-item SD totals for Mushak form 6.3 (Supplementary Duty report)
4. Handles unassigned SD — proportionally allocates across items by CIF weight

This is used for: - Mushak 6.3: Supplementary Duty report - Mushak 6.2: VAT return (SD component) - Customs valuation: SD rate on imported goods

7.7 Domestic SD Sample Data

Sample 1: Domestic Sales with SD

Sales Invoice to Customer ABC:
Item:       LCD TV, Qty: 5, Unit Price: 80,000
Subtotal:   4,00,000
SD 20%:       80,000
VAT 15%:      60,000 (on 4,00,000)
Total:      5,40,000

GL:
Dr  AccountsReceivable                  5,40,000
  Cr  Revenue                                    4,00,000
  Cr  DomesticSupplementaryDutyPayable              80,000
  Cr  Tax Payable (VAT)                              60,000

Sample 2: Domestic Purchase with SD

Purchase Invoice from Supplier XYZ:
Item:       Raw Material, Qty: 200, Unit Price: 5,000
Subtotal:   10,00,000
SD 15%:       1,50,000
VAT 15%:      1,50,000
Total:      13,00,000

GL:
Dr  Raw Material Inventory              10,00,000
Dr  DomesticSupplementaryDutyPayable      1,50,000    (reduces SD liability)
Dr  Tax Receivable (VAT)                  1,50,000
  Cr  AccountsPayable                                13,00,000

Sample 3: Net SD Position

Opening SD Payable:             5,00,000  (collected from customers)
SD on Purchases (input):      (1,50,000)  (paid to suppliers)
SD on Import LC local line:     (30,000)  (paid on import)

Net SD Payable to Tax Authority: 3,20,000

When remitted:
Dr  DomesticSupplementaryDutyPayable    3,20,000
  Cr  Cash/Bank Account                            3,20,000

8. Sample Data — Import LC (Multi-Item + FA + System pre-seeded 34 Types)

Scenario

System pre-seeded 34 Cost Lines Entered

The TaxCode column shows which lines need a TaxCode set. Only Goods lines with inventory items (FA or regular) should have a TaxCode — this is where VAT is calculated on the merged CIF + duties base.

VAT is calculated only on the 3 Goods lines. The system takes the CIF value, adds all duties with VAT base inclusion, and applies the TaxCode rate to the merged total:

Widget-X VAT:    CIF 16,50,000 + CD 4,12,500 + SD 1,65,000 = 22,27,500 x 15% = 3,34,125
Gadget-Y VAT:    CIF 5,50,000 + CD 1,37,500 + RD 55,000 = 7,42,500 x 15% = 1,11,375
Machine-Z VAT:   CIF 22,00,000 (FA — no duties merge) x 15% = 3,30,000
Total VAT:       3,34,125 + 1,11,375 + 3,30,000 = 7,75,500

How the System Processes This

The system groups costs by inventory item and processes them:

Widget-X Merge Bucket:

CIF:           16,50,000
CD:             4,12,500
SD:             1,65,000
                    ---------
Subtotal CIF+Duties: 22,27,500   (VAT base)
Pro-rata Freight:       82,500   (from shared FRT)
Pro-rata Insurance:     20,625   (from shared INS)
Pro-rata other landed:  1,03,750 (from 12 other shared types)
                    ---------
Total per unit:        24,34,375

Gadget-Y Merge Bucket:

CIF:            5,50,000
CD:             1,37,500
RD:                55,000
                    ---------
Subtotal CIF+Duties:  7,42,500   (VAT base)
Pro-rata Freight:       27,500
Pro-rata Insurance:      6,875
Pro-rata other landed:   69,167
                    ---------
Total per unit:         8,46,042

Machine-Z FA (no merge — posts directly):

FA CIF:        22,00,000
Pro-rata FRT:   1,10,000
Pro-rata INS:      27,500
                    ---------
Total:          23,37,500 -> FixedAssetsAtCost

GL Output

Dr  InventoryOnHand (Widget-X)              24,34,375
Dr  InventoryOnHand (Gadget-Y)               8,46,042
Dr  FixedAssetsAtCost (Machine-Z)           23,37,500
Dr  TaxReceivable (Widget-X VAT @15%)        3,34,125
Dr  TaxReceivable (Gadget-Y VAT @15%)        1,11,375
Dr  LCExpense (Commission, BankFee, LCC...)     34,500
Dr  InterestExpense                             8,250
Dr  AdvanceIncomeTax (AIT+AT+WHT)            2,75,250
                                             --------
Total Debits:                             63,81,417

Cr  AccountsPayable (margin 30%+other)     31,99,727
Cr  LetterOfCreditPayable (financed 70%)    31,81,690
                                             --------
Total Credits:                            63,81,417  DR = CR

Inventory Layers After Posting

Liability Split

Total Debits:                    63,81,417
LC Amount (inventory goods CIF): 16,50,000 + 5,50,000 = 22,00,000
Margin 30%:                      22,00,000 x 30% = 6,60,000
Financed 70%:                    22,00,000 x 70% = 15,40,000
Other costs:                     63,81,417 - 22,00,000 = 41,81,417
AP Portion:                      41,81,417 + 6,60,000 = 48,41,417
LCP Portion:                     63,81,417 - 48,41,417 = 15,40,000

9. Sample Data — Export LC (With Fees)

Scenario

Step 1: DocumentsShipped

Dr  ExportLCReceivable (Bank)            55,00,000
Dr  LCExpense (Commission)                  55,000
Dr  LCExpense (LC Commission)               33,000
Dr  LCExpense (Swift Charges)                8,250
  Cr  ExportLCReceivable (fee reduction)               96,250
  Cr  ExportLCARClearing (temporary)                 55,00,000
                                              --------  --------
Total Debits: 55,96,250            Total Credits: 55,96,250

Net Receivable: 54,03,750
SI Status: UNPAID (ExportLCARClearing holds the credit)

Step 2: ExportLCReceipt (Full Payment)

Cr  ExportLCReceivable                   54,03,750
Dr  ExportLCARClearing                   55,00,000
Cr  AccountsReceivable (SI-2026-042)     55,00,000
Dr  Cash (Bank Account)                  54,03,750

Step 3: Verify All Accounts

Step 4: Clear Residual (If Needed)

After receipt, a 96,250 residual (equal to fees) may remain in ExportLCARClearing and AR. Clear via Journal Entry:

Dr  ExportLCARClearing    96,250
  Cr  AccountsReceivable           96,250
-> All accounts zero

10. Field-by-Field Analysis & Fallback Chains

10.1 Import LC Header Fields

10.2 Cost Line Fields

10.3 Export LC Header Fields

10.4 Export LC Receipt Fields

11. Currency Configuration

What To Do

1. Navigate to Settings > Currencies > New ForeignCurrency
2. Enter: - Code: USD (or EUR, GBP, etc.) - Name: US Dollar - Exchange Rate: Current market rate (e.g., 110 = 1 USD = 110 BDT) - Exchange Rate Is Inverse: Leave unchecked (standard format)

How It Works

1. Set LC Currency = USD and Exchange Rate = 110 on the LC header
2. All cost line amounts are treated as USD
3. Each amount is converted: $1,000 x 110 = BDT 110,000
4. Both USD and BDT amounts are stored in the General Ledger
5. At period-end, the system revalues outstanding LC monetary accounts (LCP, ExportLCReceivable, ExportLCARClearing) at the current exchange rate, posting gain/loss to Currency Gains/Losses in P&L

Without Currency

Leave LC Currency empty and Exchange Rate at 0. All amounts are treated as base currency. No conversion occurs.

12. TaxCode Requirements

Which Lines Need a TaxCode

How the VAT Base Is Computed

When you set a TaxCode on the Goods line, the system automatically:

1. Takes the CIF value of the goods
2. Adds all duties that have the Include in VAT Base flag set (CD, RD, SD, CVD, ADD, SFG)
3. Calculates VAT = Total x TaxCode Rate
4. Creates a separate GL entry: Dr Tax Receivable / Cr Tax Payable

Example:

CIF:          16,50,000
CD:            4,12,500
RD:               49,500
SD:            4,12,500
CVD:              82,500
ADD:              33,000
SFG:              16,500
                --------
VAT Base:    26,56,500
VAT 15%:      3,98,475

GL: Dr TaxReceivable 3,98,475 / Cr TaxPayable 3,98,475

What Happens If No TaxCode

No VAT entry is created. The Tax Receivable and Tax Payable accounts show no movement from this LC. If VAT was expected, the financial statements will be understated.

TaxCode on DomesticSupplementaryDutyPayable Lines (PI / SI / DN / CN)

⚠️ WARNING: Do NOT set TaxCode on DomesticSupplementaryDutyPayable lines.

This is one of the most common user errors. Here is what happens and why it is wrong.

What Happens If You Set TaxCode on a DomesticSD Line

When a transaction line has: - Account = DomesticSupplementaryDutyPayable - TaxCode = VAT-15% (set by user)

The GL posting engine will create a separate VAT entry on the SD amount:

Example: Sales Invoice with user error

Line 1: Item=TV, Account=Revenue, Amount=1,00,000, TaxCode=VAT-15% (CORRECT)
Line 2: Account=DomesticSDPayable, Amount=20,000, TaxCode=VAT-15% (USER ERROR)

GL entries created:
  Dr  AccountsReceivable          1,20,000
    Cr  Revenue                              1,00,000    (correct)
    Cr  DomesticSupplementaryDutyPayable         20,000    (correct — SD liability)

  Dr  AccountsReceivable             23,000              (VAT on revenue — correct)
    Cr  TaxPayable                                23,000

  Dr  AccountsReceivable              3,000              (VAT on SD amount — WRONG!)
    Cr  TaxPayable                                 3,000

Total VAT: 26,000 (23,000 + 3,000) — OVERSTATED by 3,000 ❌

The third entry (VAT on SD amount) is incorrect accounting.

Why This Is Wrong — Accounting & NBR Regulations

The Correct Approach

Correct example:

Sales Invoice line 1:  Item=TV, Account=Revenue, Amount=1,00,000, TaxCode=VAT-15%  ✅
Sales Invoice line 2:  Account=DomesticSDPayable, Amount=20,000, TaxCode=(BLANK)    ✅

GL entries:
  Dr  AccountsReceivable          1,20,000
    Cr  Revenue                              1,00,000
    Cr  DomesticSupplementaryDutyPayable         20,000

  Dr  AccountsReceivable             15,000   (VAT on 1,00,000 — correct)
    Cr  TaxPayable                                15,000

Total VAT: 15,000 ✅  (no tax-on-tax)
SD Payable: 20,000 ✅  (separate liability)

The SDInventoryItem Field Is for Reporting, Not Tax

The SDInventoryItem field on SD lines exists to: - Track which items are subject to Supplementary Duty for Mushak 6.3 reporting - Calculate effective SD rate per item - It does NOT trigger VAT calculation

So SDInventoryItem is safe to set. TaxCode on SD lines is NOT safe.

TaxCode on Non-Goods Lines in Import/Export LCs

Setting TaxCode on Duties, Landed Costs, Period Costs, or Tax Asset lines in an LC has NO effect — it is silently ignored.

What Happens

The LC posting engine only processes TaxCode in exactly three places:

The TaxCode value on non-Goods lines is stored in the cost line data but never read by the posting engine. No error is raised, no warning is shown — the TaxCode is simply not processed.

Why This Is Correct Per NBR Regulations

Where Should TaxCode Be Set in an LC?

Example — Correct TaxCode placement in LC cost lines:

Line 1: Goods (CIF), Item=Widget-X, Qty=1000, Amount=16,50,000, TaxCode=VAT-15%  ✅
Line 2: Customs Duty (CD), Item=Widget-X, Amount=4,12,500, TaxCode=(BLANK)         ✅
Line 3: Freight (FRT), Amount=50,000, TaxCode=(BLANK)                              ✅
Line 4: Commission (COM), Amount=8,250, TaxCode=(BLANK)                            ✅
Line 5: AIT, Amount=1,29,375, TaxCode=(BLANK)                                      ✅

VAT is calculated on: CIF 16,50,000 + CD 4,12,500 = 20,62,500 x 15% = 3,09,375 ✅

13. Status Lifecycle — GL Creation Matrix

Import LC Statuses

                  |   No Entry   |   Posted   |   Remain   |  Reversed
                  |  (Off-BS)    |  (On-BS)   |  (On-BS)   |  (Removed)
------------------+--------------+------------+------------+-------------
Draft (0)         |      X       |            |            |
Opened (1)        |      X       |            |            |
DocumentsPresented|              |     X      |            |
Paid (3)          |              |            |     X      |
Closed (4)        |              |            |            |     X
Cancelled (5)     |              |            |            |     X

Key Rules: - Draft/Opened: No GL entries. LC is off-balance-sheet (contingent liability per IAS 37). - DocumentsPresented: GL entries CREATED. All costs recorded, liabilities split. - Paid: GL entries PERSIST. Same as DocumentsPresented. - Closed/Cancelled: GL entries REVERSED. All prior entries negated. - Changing FROM DocumentsPresented/Paid to any other status = Full reversal. - Changing between Draft/Opened (both reversed) = no change. - Changing between Closed/Cancelled (both reversed) = no change.

Export LC Statuses

                   |   No Entry   |   Posted   |   Remain   |  Reversed
Draft (0)         |      X       |            |            |
Opened (1)        |      X       |            |            |
DocumentsShipped  |              |     X      |            |
Paid (3)          |              |            |     X      |
Closed (4)        |              |            |            |     X
Cancelled (5)     |              |            |            |     X

Reversal Behaviour

Changing the LC status affects accounting entries as follows:

• DocumentsPresented / DocumentsShipped and Paid — entries are posted normally
• Draft, Opened, Closed, Cancelled — all entries are reversed (every amount is negated)

When you change to a reversing status, the system shows a warning if there are any linked transactions (payments, receipts, adjustments). Review these linked documents before proceeding. Reversal should only be used when fully closing or cancelling an LC.

14. Reports & Output

14.1 LC View (Import)

Where: Click an LC from the Letters of Credit list.

What It Shows:

  --------------------------------------------------
  |               Letter of Credit                  |
  --------------------------------------------------
  | LC Number:       LC-2026-001                   |
  | Issue Date:      5/1/2026                      |
  | Expiry Date:     8/1/2026                      |
  | Maturity Date:   8/1/2026                      |
  | Supplier:        China Trading Co.             |
  | LC Amount:       BDT 16,50,000                 |
  | Margin:          30%                           |
  | Interest Rate:   10% (Days360)                 |
  | Status:          DocumentsPresented             |
  --------------------------------------------------
  | #  Cost Type           Item       Qty   Amount |
  | 1  Goods (CIF)         Widget-X   1000 16,50K  |
  | 2  Customs Duty        Widget-X         4,12K  |
  | ... (system pre-seeded all 34 cost lines)      |
  --------------------------------------------------
  | Sub-totals:                                     |
  |   CIF + Duties                   26,56,500     |
  |   Landed Costs                    2,12,750     |
  |   Period Costs                      40,500     |
  |   AIT + AT + WHT                  2,75,250     |
  |   Total                          31,85,000     |
  |   VAT-15% (on 26,56,500)          3,98,475     |
  |   Total Payable                  35,83,475     |
  --------------------------------------------------
  | Payment History:                                |
  |   5/30/2026 — Payment              -24,28,475  |
  |   6/15/2026 — Payment              -11,55,000  |
  | Outstanding: 0                                  |
  | Payment Status: Fully Paid                     |
  |                                                 |
  | [Accrue Interest] [Reset Accrual] [New Payment] |
  --------------------------------------------------

14.2 Export LC View

Where: Click an Export LC from the Export Letters of Credit list.

  --------------------------------------------------
  |            Export Letter of Credit              |
  --------------------------------------------------
  | LC Number:       ELC-2026-001                  |
  | Customer:        ABC Trading (Germany)         |
  | Sales Invoice:   SI-2026-042                   |
  | LC Amount:       BDT 55,00,000                 |
  | Interest Rate:   5% (Days360)                  |
  | Status:          DocumentsShipped              |
  --------------------------------------------------
  | #  Fee Type            Amount                  |
  | 1  Commission          55,000                  |
  | 2  LC Commission       33,000                  |
  | 3  Swift Charges        8,250                  |
  | Total Fees              96,250                 |
  | Net Receivable        54,03,750                |
  |                                                 |
  | Receipts: EXP-RCPT-001   -54,03,750             |
  | Outstanding: 0                                  |
  | Payment Status: Fully Paid                     |
  |                                                 |
  | [Accrue Interest] [Reset Accrual] [Receive]    |
  --------------------------------------------------

14.3 LC Exposure Report (Import)

Where: Reports > LC Exposure Report

Parameters: Date range, Division (optional), Project (optional), Supplier (optional)

LC#      Supplier     Div   IssueDate  LC Amount  Int%  TotalPayable  VAT     LandedCost   Outstanding  Status
LC-001   ChinaTrading Dhaka 5/1/2026   16,50,000  10%   35,83,475     3,98K  28,69,250     0            Paid
LC-002   JapanCorp    Dhaka 6/1/2026   25,00,000   5%   52,00,000     6,00K  42,00,000    12,00,000    DocPresented

Can group by supplier to show sub-totals per supplier.

14.4 Export LC Exposure Report

Where: Reports > Export LC Exposure Report

ELC#      Customer       LC Amount   Fees    Net Recvble  Received   Outst  Status
ELC-001   ABC Germany    55,00,000   96,250  54,03,750    54,03,750   0     Paid
ELC-002   France SA      30,00,000   50,000  29,50,000     5,00,000  24,50K DocShipped

14.5 Balance Sheet / Trial Balance / P&L Impact

Balance Sheet:

Assets:                              Liabilities:
  InventoryOnHand          28,69,250    AccountsPayable                   0
  AdvanceIncomeTax          2,75,250    LetterOfCreditPayable             0
  TaxReceivable             3,98,475    LCAccrualInterestPayable          0
  ExportLCReceivable                0
                                   Equity:
                                     Retained Earnings (P&L)       (40,500)

Trial Balance:

Account                           Debits        Credits
InventoryOnHand                  28,69,250
AdvanceIncomeTax                  2,75,250
TaxReceivable                     3,98,475
LCExpense                           34,500
InterestExpense                      6,000
AccountsPayable                                24,30,725
LetterOfCreditPayable                          11,55,000
                                 --------      --------
Total                            35,83,475     35,83,475  DR = CR

Profit & Loss Statement:

Revenue                                    0
LC Bank Charges                        34,500
Interest Expense                        6,000
Net Loss                              (40,500)

Note: Only period costs appear in P&L. All other costs are either capitalized to inventory or recorded as BS assets.

14.6 Mushak 6.1 — VAT Return (Basic)

Where: Reports > Mushaks > Mushak 6.1

Purpose: Monthly/quarterly VAT return summarizing total output VAT (sales) and input VAT (purchases) for the period.

How LC Data Appears: - Import LC VAT (from TaxCode on Goods lines) appears in Input VAT column - Export LC is VAT-exempt (exports are zero-rated) — not included

Mushak 6.1 — VAT Return
Period: June 2026

Description                    Value   Output VAT  Input VAT
Sales of goods (local)        50,000    7,500
Sales of goods (export)       55,000        0     (zero-rated)
Import via LC (Widget-X)      16,50,000              3,34,125
Import via LC (Gadget-Y)       5,50,000              1,11,375
Local purchases               10,00,000              1,50,000
                              --------  --------    --------
Total                         32,50,000  7,500      5,95,500

Net VAT Payable: 7,500 - 5,95,500 = (5,88,000) Refundable

14.7 Mushak 6.7 — Credit Note (Sales Return)

Where: Reports > Mushaks > Mushak 6.7

Purpose: Official VAT document for sales returns and adjustments. Compares the original SalesInvoice against the CreditNote side-by-side for quantity, amount, VAT, and Supplementary Duty.

Relation to Export LC Return (Section 6): When an Export LC return occurs (Section 6.2 — Case B), the Credit Note issued after receipt is documented by this report. The report shows both the original SI and the CN amounts, enabling the VAT authority to verify the return.

How the Handler Calculates Values (Two-pass algorithm):

Pass 1 — Collect SD amounts by SDInventoryItem from both SI and CN lines.

For each SI line group:
  If IsLocalSdLine is true → SD detected
  sdByItem67[SDInventoryItem] += Sum(non-tax BaseAmount) = sd amount

For each CN line group:
  Same IsLocalSdLine check → sdByItemCn67

Pass 2 — Aggregate non-SD goods lines:

SI side:
  siAmount   = Sum(BaseAmount * -1m)          (sales are credit-side, amount inverted)
  siQty      = abs(Qty)
  siSdAmount = Sum(sdByItem67 values)
  siTaxAmount = Abs(Sum of IsTaxTransaction BaseAmount with TaxComponent)

CN side:
  cnAmount   = BaseAmount                     (CN is debit-side, no inversion)
  cnQty      = abs(Qty)
  cnSdAmount = Sum(sdByItemCn67 values)
  cnTaxAmount = Abs(Sum of IsTaxTransaction BaseAmount with TaxComponent)

SD Detection: Lines are identified as SD when their Account matches BalanceSheetDomesticSupplementaryDutyPayableAccount. The SDInventoryItem field on the transaction line links the SD to a specific inventory item.

VAT Calculation: Taken directly from GL transactions with IsTaxTransaction = true and non-empty TaxComponent. This is the actual VAT posted, not a computed value.

Sample Output — Export LC Return (from Section 6.2 — Case B):

Mushak 6.7 — Credit Note
Period: June 2026

Related SI: SI-2026-042
Reason: Goods returned by customer

                      Original SI         Credit Note      Difference
Amount                55,00,000           1,00,000         54,00,000
Quantity               500                 0                500
VAT Amount                   0                   0                0    (zero-rated export)
SD Amount                    0                   0                0

Sample Output — Domestic SD Sales Return:

Mushak 6.7 — Credit Note
Period: June 2026

Related SI: SI-2026-050
Reason: Defective goods returned

                      Original SI         Credit Note      Difference
Amount                4,00,000              80,000         3,20,000
Quantity               10                     2                8
VAT Amount              60,000              12,000           48,000
SD Amount               80,000              16,000           64,000

Link to Export LC Return (Section 6.2 — Case B):

After ExportLCReceipt + Credit Note + JE to clear residual:
  ExportLCARClearing: 55,00,000 (created) - 54,03,750 (receipt) + 1,00,000 (JE) = 96,250
  AccountsReceivable: 55,00,000 (created) - 54,03,750 (receipt) + 1,00,000 (JE) = 96,250

The 96,250 residual must be cleared separately (see Section 6.2 — Step 2).
The Credit Note's VAT and SD amounts should match the original SI's
proportional amounts to properly reverse the tax position.

Cross-reference: See Section 6 for the complete Export LC return workflow.

14.8 Mushak 6.8 — Debit Note (Purchase Return)

Where: Reports > Mushaks > Mushak 6.8

Purpose: Official VAT document for purchase returns and adjustments. Compares the original PurchaseInvoice against the DebitNote side-by-side for quantity, amount, VAT, and Supplementary Duty.

Relation to Import LC Return (Section 5): When an Import LC return occurs (Section 5), the DebitNote issued in Step 1 is documented by this report. The DebitNote reverses the CIF value (16,50,000) but NOT the duties and taxes — those are reversed separately via Journal Entry (Step 2).

How the Handler Calculates Values (Two-pass algorithm, same pattern as 6.7):

Pass 1 — Collect SD by item from PI and DN lines:

For each PI line group:
  If IsLocalSdLine is true → SD detected
  piSdByItem68[SDInventoryItem] += Sum(non-tax BaseAmount)

For each DN line group:
  same IsLocalSdLine check → dnSdByItem68

Pass 2 — Aggregate non-SD goods lines:

PI side:
  piAmount   = Sum(BaseAmount of non-tax lines)
  piQty      = abs(Qty)
  piSdAmount = Sum(piSdByItem68 values)
  piTaxAmount = Abs(Sum of IsTaxTransaction BaseAmount with TaxComponent)

DN side:
  dnAmount   = BaseAmount * -1m               (DN reverses, amount inverted)
  dnQty      = abs(Qty)
  dnSdAmount = Sum(dnSdByItem68 values)
  dnTaxAmount = Abs(Sum of IsTaxTransaction BaseAmount with TaxComponent)

SD Detection: Identical to 6.7 — IsLocalSdLine checks for BalanceSheetDomesticSupplementaryDutyPayableAccount. Only domestic SD is detected; import SD from LC is handled by SupplementaryDutyProvider for the inventory side and does NOT appear in the DebitNote SD column.

VAT Calculation: From GL IsTaxTransaction lines with TaxComponent. The PI side includes the full VAT from the original purchase. The DN side will have zero VAT (since the DebitNote only reverses CIF, not taxes).

Sample Output — Import LC Return (from Section 5.2 — Step 1):

Mushak 6.8 — Debit Note
Period: June 2026

Related PI: PI-2026-018 (covering LC-2026-001 Widget-X import)
Reason: Goods returned to supplier

                      Purchase Invoice    Debit Note      Difference
Amount                28,69,250           16,50,000       12,19,250
Quantity               1,000               1,000                0
VAT Amount             3,98,475                0           3,98,475
SD Amount                    0                   0                0  (import SD, not domestic)

Why the VAT and SD differences exist (validated against Section 5.3):

The DebitNote reverses only the CIF value paid to the SUPPLIER.
Amount:    28,69,250 (full landed cost) vs 16,50,000 (CIF only)
           Difference = 12,19,250 = duties (10,06,500) + landed (2,12,750)

VAT:       3,98,475 vs 0
           VAT was paid to CUSTOMS, not the supplier.
           It must be recovered via Journal Entry (Section 5.3 — Step 2).

SD Amount: 0 vs 0
           This is import SD (capitalized to inventory), not domestic SD.
           It is handled by the inventory cost layer, not by Mushak 6.8.

The 3-Transaction Workflow and Mushak 6.8:

This is correct per NBR VAT rules — Mushak 6.8 only documents the physical return of goods to the supplier. Duty and tax recovery is a separate process with the customs authority, documented through regular accounting entries.

Cross-reference: See Section 5 for the complete Import LC return workflow.

14.9 Mushak 6.2 — VAT Supplementary

Where: Reports > Mushaks > Mushak 6.2

Purpose: Detailed supplementary return with per-transaction breakdown, used by businesses with turnover above the threshold.

LC Impact: - Each LC's VAT amount appears as a separate row - Broken down by TaxCode component (if multiple rates) - Linked to the Goods line's item for audit trail

Mushak 6.2 — VAT Supplementary
Period: June 2026

<h1 id="transaction-type-suppliercustomer-item-value-vat-rate-vat-amount">Transaction Type  Supplier/Customer  Item       Value      VAT Rate  VAT Amount</h1>
1  Import LC         China Trading      Widget-X   22,27,500  15%       3,34,125
2  Import LC         China Trading      Gadget-Y    7,42,500  15%       1,11,375
3  Local Purchase    Supplier XYZ       Raw Mat.   10,00,000  15%       1,50,000
                                                                        --------
Total Input VAT:                                                        5,95,500

14.10 Mushak 6.3 — Supplementary Duty Report

Where: Reports > Mushaks > Mushak 6.3

Purpose: Reports Supplementary Duty collected on sales and paid on purchases, both import and domestic.

Two SD Sources Tracked:

1. Import SD — from LC cost lines where CostType = SupplementaryDuty - Capitalizes to inventory (cost of goods) - SD rate = Total SD / Total CIF (computed automatically) - Used for NBR SD rate verification

2. Domestic SD — from Sales/Purchase invoice lines with Account = DomesticSupplementaryDutyPayable - Pass-through liability (not a cost) - Tracked via SDInventoryItem field - Net position = SD collected - SD paid

Mushak 6.3 — Supplementary Duty Report
Period: June 2026

A. Import Supplementary Duty (via LC)
CIF Value:      22,00,000
SD Amount:       1,65,000
Effective SD Rate: 7.5%
Item: Widget-X (HS Code: 8528.72)

B. Domestic Supplementary Duty
Opening SD Payable:                    5,00,000
SD Collected on Sales:                 1,80,000
SD Paid on Purchases:                 (1,50,000)
SD on Local LC:                         (30,000)
                                       --------
Net SD Payable to NBR:                 5,00,000

How SD Rate Is Computed:

The system scans all Import LCs in the date range.
For each item, it totals:
  Total SD Amount = Sum of Supplementary Duty cost lines
  Total CIF Amount = Sum of Goods (CIF) cost lines
  SD Rate = Total SD / Total CIF x 100

If SD is not assigned to a specific item, it is
proportionally allocated by CIF weight across all items.

14.11 Mushak 6.10 — Sales Summary

Where: Reports > Mushaks > Mushak 6.10

Purpose: Summary of all sales (local and export) for the VAT period, used to compute output VAT.

LC Impact: Export LCs appear as zero-rated export sales.

Mushak 6.10 — Sales Summary
Period: June 2026

Type                  Count     Total Value  VAT Rate  VAT Amount
Local Sales              25     5,00,000     15%         75,000
Export (via LC)           1    55,00,000      0%              0
                         --   ----------               --------
Total                    26   60,00,000                  75,000

14.12 Mushak 4.3 — Purchase Summary

Where: Reports > Mushaks > Mushak 4.3

Purpose: Summary of all purchases (local and import) for the VAT period, used to claim input VAT credit.

LC Impact: Import LCs appear as import purchases with their VAT amounts.

Mushak 4.3 — Purchase Summary
Period: June 2026

Type                    Count     Total Value  VAT Amount
Local Purchases             10    10,00,000      1,50,000
Import via LC                2    22,00,000      3,30,000
Import via LC (duties)       2    10,06,500            0  (not VAT-able)
Import via LC (landed)       2     2,12,750            0  (not VAT-able)
                            --   ----------     ---------
Total                       16    44,19,250      4,80,000

14.13 General Ledger Transactions Report

Where: Reports > General Ledger Transactions

Purpose: View all GL transactions including LC entries with full DR/CR display.

LC Transactions Appear As:

Date       Transaction     Account                  Dr         Cr
5/1/2026   LC-2026-001     InventoryOnHand         28,69,250
5/1/2026   LC-2026-001     TaxReceivable             3,98,475
5/1/2026   LC-2026-001     LCExpense                   34,500
5/1/2026   LC-2026-001     InterestExpense              6,000
5/1/2026   LC-2026-001     AdvanceIncomeTax          2,75,250
5/1/2026   LC-2026-001     AccountsPayable                      24,30,725
5/1/2026   LC-2026-001     LetterOfCreditPayable                11,55,000
                            ─────────                35,83,475  35,83,475  DR=CR

14.14 Inventory Reports (Impact of LC Costs)

Where: Reports > Inventory Reports

How LC Costs Flow Into Inventory Reports:

15. Error Scenarios & What To Check

Quick Pre-Save Checklist

[ ] All Goods lines have InventoryItem set
[ ] All Goods lines have Qty > 0
[ ] TaxCode set on Goods line(s)
[ ] All cost data is in CostLines — PaymentSchedule is for cash flow only, no GL impact
[ ] TaxCode NOT set on DomesticSupplementaryDutyPayable lines
[ ] TaxCode NOT set on Duty / Landed Cost / Period Cost / Tax Asset lines in LC
[ ] LCAmount = total inventory goods CIF (not FA)
[ ] MarginPercent is between 1-99 for bank financing
[ ] ExchangeRate > 0 if LCCurrency set
[ ] Status is correct before changing to DocumentsPresented
[ ] All cost lines have correct CostTypeSetting
[ ] Landed costs without Item are intentional (will be pro-rata)

§. Accounting Regulation Validation

Standards Compliance Summary

Why DR = CR Is Guaranteed

For every Import LC, the system: 1. Computes the total of all debit entries across inventory, tax, P&L, and asset accounts 2. Splits this total into two portions based on Margin Percent: - Accounts Payable = your margin portion + other costs - Letter of Credit Payable = bank financed portion 3. Posts exactly this total as credits

Total Debits = Accounts Payable + Letter of Credit Payable = Total Credits

Key Accounting Principles Applied