Skip to content

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

Gupta endorsed to Hari a bill of ₹30,000 accepted by Iqbal. Iqbal becomes insolvent and the bill is dishonoured at maturity. Iqbal's estate later pays 30 paise in the rupee, and Hari claims the full amount from Gupta. How much does Gupta finally lose, if he pays Hari in full now and then recovers the dividend from Iqbal's estate?

Gupta's final loss is ₹21,000. He pays the endorsee the full ₹30,000, then recovers 30 percent, or ₹9,000, from the insolvent acceptor's estate, so the unrecovered balance is ₹21,000, which is a bad debt.

  1. A₹30,000
  2. B₹9,000
  3. C₹21,000Correct
  4. D₹0

Explanation

Gupta pays Hari ₹30,000 in full. He then recovers 30% of ₹30,000, which is ₹9,000, from Iqbal's estate. Net loss is ₹30,000 − ₹9,000 = ₹21,000. ₹9,000 is the amount recovered, not the loss.

Did you get it right without looking?

One question tells you little. A timed set on Bills of Exchange shows your real accuracy, how long you take and where you lose marks.

Practise Bills of ExchangeFree diagnostic mock

More Bills of Exchange questions