Why letters of credit and letters of guarantee issued by banks on behalf of their customers not shown in the balance sheet as advances are reported separately as off balance sheet items?

Letter of Credits and Letter of Guarantees issued by banks on behalf of their customers are contingents which do not exist as on the date of balance sheet. There is no actual liability as the date of balance sheet but they may arise in future. Letter of credit is granted for future purchase of material expected to be received in due course of time and is not available physical in the unit premises. Unlike other items, which are classified as balance sheet items, the contingent liabilities are classified as off balance sheet items. The balance sheet items are parts of the balance sheet as historical items, whereas the contingent liabilities are future items. In case these items become payable, it would affect the liquidity position of the company.