Define: Letter Of Credit

UK Accounting Glossary

Definition: Letter Of Credit



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Full Definition of Letter Of Credit


A letter of credit is a document a buyer requests from their bank stating that payment to a seller will be made, in order to reassure the seller that they will not be left empty-handed. The seller receives this letter of credit from the buyer’s bank. A letter of credit authorizes the seller to draw drafts up to a stipulated amount – thus the bank ends up paying instead of the buyer. A letter of credit often comes with very specific instructions in order for the seller to obtain the payment(s). To make good on the letter of credit, the seller must often present the necessary documentation within a specified time frame confirming the delivery of goods. A letter of credit is often used in international business, since the letter of credit essentially helps eliminate risk.


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https://payrollheaven.com/define/letter-of-credit/
Modern Language Association (MLA):
Letter Of Credit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. March 28, 2020 https://payrollheaven.com/define/letter-of-credit/.
Chicago Manual of Style (CMS):
Letter Of Credit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/letter-of-credit/ (accessed: March 28, 2020).
American Psychological Association (APA):
Letter Of Credit. PayrollHeaven.com. Retrieved March 28, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/letter-of-credit/

Definition Sources


Definitions for Letter Of Credit are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 10th February 2020.