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CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange

A bill of Rs 25,000 accepted by Bose & Co. was dishonoured on the due date. Noting charges of Rs 500 were paid by the holder, Gupta Traders, who had retained the bill till maturity. What is the entry in Gupta's books?

Gupta Traders debits Bose & Co. with Rs 25,500 and credits Bills Receivable with Rs 25,000 and Cash with Rs 500. On dishonour the acceptor becomes a debtor again for the bill amount, and the noting charges paid by the holder are recoverable from him.

  1. ABose & Co. A/c Dr 25,000 To Bills Receivable A/c 25,000
  2. BBose & Co. A/c Dr 25,500 To Bills Receivable A/c 25,000 To Cash A/c 500Correct
  3. CNoting Charges A/c Dr 500 To Cash A/c 500
  4. DBills Receivable A/c Dr 25,500 To Bose & Co. A/c 25,500

Explanation

On dishonour, the acceptor again becomes a debtor for the bill amount plus noting charges, which are recoverable from him. So Bose & Co. is debited Rs 25,500, Bills Receivable is credited Rs 25,000 and Cash Rs 500. Option A omits the noting charges that Gupta can recover.

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