What is line of credit, how to take care and account the line of credit? That is all about this post.

A line of credit is like a loan that a company can use if and when the need arises. The advantage of a line of credit over a loan is that interest is charged only on the amount of the line of credit that the company have drawn from the total amount available.

A line of credit is issued with a maximum amount, but you only need to track the amount you’ve drawn and is therefore outstanding. There are a variety of plans that financial institutions use to award and track a line of credit, but for this discussion I’ll assume your line of credit follows the common scenario: