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

Anil draws a ₹30,000 bill on Bimal, who accepts it. Anil immediately endorses it to his creditor Chand in full settlement of ₹30,000 owed. The entry in Anil's books on endorsement is:

Anil debits Chand's account and credits Bills Receivable for ₹30,000. Endorsement passes the bill to the creditor, reducing the receivable asset and discharging the amount Anil owed Chand.

  1. AChand A/c Dr. 30,000 to Bills Receivable A/c 30,000Correct
  2. BBills Receivable A/c Dr. 30,000 to Chand A/c 30,000
  3. CBills Payable A/c Dr. 30,000 to Bills Receivable A/c 30,000
  4. DChand A/c Dr. 30,000 to Bimal A/c 30,000

Explanation

Endorsing the bill transfers the asset to Chand, so Bills Receivable is credited. Chand, the creditor, is debited as his claim is discharged. Option B would increase the asset again. Option D is wrong since Bimal's account was already cleared when he accepted the bill.

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