CA Foundation · Accounting · Bills of Exchange and Promissory Notes
Gupta Enterprises (drawee) accepted a bill for ₹30,000 drawn by Jain Sons. At maturity, Gupta Enterprises pays the amount in cash. The entry in Gupta Enterprises' books is:
The drawee debits Bills Payable Account and credits Cash Account on paying at maturity. Bills Payable was a liability created on acceptance, and payment discharges it while reducing cash.
- ADebit Bills Payable Account, credit Cash AccountCorrect
- BDebit Jain Sons, credit Bills Payable Account
- CDebit Cash Account, credit Bills Payable Account
- DDebit Bills Receivable Account, credit Cash Account
Explanation
The drawee created a liability, Bills Payable, upon acceptance. Paying at maturity extinguishes that liability, so Bills Payable is debited and Cash is credited. Option B is the entry made at acceptance, not at payment.
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