CMA Intermediate · Financial Accounting · Bills of Exchange
A bill of exchange for Rs 30,000 accepted by Mehta Traders is dishonoured on the due date, and the holder, Rao & Sons, pays Rs 200 as noting charges to the notary. Mehta Traders is to bear the charges. What amount will Rao & Sons debit to Mehta Traders' account on dishonour of the bill?
Rao & Sons debits Mehta Traders with Rs 30,200. The drawee is liable for the bill amount of Rs 30,000 and also for the Rs 200 noting charges, which are recoverable from him, so both are added when the dishonoured bill is entered as a receivable.
- ARs 30,000
- BRs 30,200Correct
- CRs 29,800
- DRs 200
Explanation
On dishonour the drawee becomes a debtor for the bill amount plus the noting charges recoverable from him. Debit to Mehta Traders = 30,000 + 200 = Rs 30,200. Rs 30,000 ignores the charges, and Rs 29,800 wrongly deducts them.
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