CA Intermediate · Financial Management and Strategic Management · Financing of Working Capital
Anand Exports discounts a bill of exchange of ₹5,00,000 with its bank, 90 days before maturity. The bank charges discount at 12% p.a. (360-day year) and a flat processing commission of 0.5% of the bill value, both deducted upfront. What net amount does Anand Exports receive?
The firm receives ₹4,82,500. The bank deducts discount of ₹15,000 (12% for 90/360 of a year on ₹5,00,000) and a commission of ₹2,500 (0.5% of the bill). Subtracting both from the bill value leaves net proceeds of ₹4,82,500.
- A₹4,97,500
- B₹4,85,000
- C₹4,82,500Correct
- D₹4,40,000
Explanation
Discount = 5,00,000 × 12% × 90/360 = ₹15,000. Commission = 0.5% × 5,00,000 = ₹2,500. Net proceeds = 5,00,000 − 15,000 − 2,500 = ₹4,82,500. The ₹4,85,000 option omits the commission, and ₹4,40,000 charges a full year of discount instead of 90 days.
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