CA Foundation · Accounting · Bills of Exchange and Promissory Notes
Asha Traders holds a bill of exchange for ₹80,000 accepted by Bhanu & Co. She discounts it with her bank at 12% per annum for 3 months (unexpired period). What amount does the bank credit to Asha Traders' account?
The bank credits ₹77,600. Discount is calculated on the face value of ₹80,000 at 12% for three months, which is ₹2,400, and this is deducted from the bill amount to give net proceeds received by the holder from the bank.
- A₹77,600Correct
- B₹80,000
- C₹70,400
- D₹72,000
Explanation
Discount = 80,000 × 12% × 3/12 = ₹2,400. Net proceeds = 80,000 − 2,400 = ₹77,600. Option ₹72,000 wrongly uses a full year's discount of ₹9,600... actually ₹70,400 results from a year's discount; ₹72,000 results from deducting 10% wrongly. The drawer records discount as an expense, not a deduction from the bill amount in the debtor's books.
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