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CA Foundation · Accounting · Accounts from Incomplete Records

In preparing a Total Creditors Account, a bill payable of Rs 25,000 accepted by the firm in favour of a supplier during the year should be treated as:

A bill payable accepted in favour of a supplier is a debit entry in the Total Creditors Account. Acceptance discharges the personal liability to the creditor, replacing it with a bills payable liability, so the creditors balance is reduced by Rs 25,000.

  1. AA credit entry, increasing creditors
  2. BA debit entry, reducing creditorsCorrect
  3. CIgnored, as bills are not related to creditors
  4. DAdded to closing creditors

Explanation

Accepting a bill payable settles the supplier's account, so the amount owed to creditors falls. It is shown on the debit side of the Total Creditors Account. Treating it as a credit would wrongly increase the amount owed.

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