In this blog I’m going to show how the letter of credit(import) setup is done and how it works in Microsoft Dynamics AX 2012 R3.
Letter of credit is a document which gives guarantee that the seller will receive full payment if certain conditions are met. In Microsoft dynamics AX 2012 for using letter of credit, setup needs to be done first.
First you have to enable the letter of credit functionality in Cash and Bank Management>Setup>Cash and Bank Parameters>General Tab>Bank Document fast tab
Mark the Enable import letter of credit checkbox
Now Setup bank facility, bank facility agreements and bank documents posting profiles
Goto>Cash and Bank Management>Setup>Bank Documents>Bank Facilities
Here setup a facility group for letter of credit
Now setup a facility for letter of credit and assign it to the group created for Letter of Credit
Now go to>Cash and bank management>Setup>Bank documents>Bank facility agreements
Here setup a facility agreement for letter of credit
For using letter of credit, setup of bank facility agreement is mandatory step, here enter bank agreement number, bank account, start and end dates.
In the Facility type field select the Facility type and in Limit field enter amount which bank has agreed for the facility
The Amount used is the amount of letter of credit already been used, system will not allow user to create letter of credit exceeding the amount remaining i.e. Limit less amount used
Now setup bank documents posting profiles,
Go to>Cash and Bank management>Setup>Bank Documents>Bank document posting profiles
Here setup the settlement, margin and charges accounts for letter of credit.
Now go to all vendors list page in Accounts Payable module, select the vendor to whom Letter of Credit will be issued, and setup bank for that vendor
Now create a purchaseorder, select item and enter price details
Go to>Header view>Price and discount fast tab>Payment tab>Bank document type
Select bank document type as letter of credit
Now on the Manage tab of purchase order on the bank document type field select letter of credit,
Letter of credit form will be opened,
Here enter details for letter of credit,
Enter document number select bank account, date of receipt, advisory bank, date of issue and expiration date
Now select Fetch purchase order shipment, lines from associated purchase order will be fetched
Now confirm the purchase order and then confirm the letter of credit
Now create a voucher for margin payment,
Go to>General Ledger>Journals>General Journal
Create a new journal and go to lines, on the Payment tab>letter of credit import collection select transaction type as margin and then select letter of credit,
On the overview tab enter the amount on the debit field for margin payment and then post the journal
Margin account is debited and bank account is credited now
Now on the letter of credit form, select Bank document margin,
Letter of credit margin transactions form will be opened,
Select the voucher and select how to allocate margin to the shipment line and select shipment number and then click Ok and close the form
Now on the purchase order Post the Product receipt and Invoice and for both you have to select the shipment
After posting invoice, create a payment journal and select the invoice to pay for the relevant purchase order, on the payment tab you’ll see that on Letter of credit field, bank document and shipment number are populated,
Now post the payment journal and view the voucher,
The voucher posted at the time of margin payment is reversed and second entry is posted for payment of invoice.
This is how letter of credit(Import) end to end scenario works in Microsoft Dynamics AX 2012 R3.