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CA Foundation · Accounting · Bills of Exchange and Promissory Notes

Karan and Lokesh draw and accept an accommodation bill of ₹50,000 for their joint benefit. Karan is the drawer, discounts the bill for ₹49,000 and gives Lokesh half of the proceeds. In Lokesh's books, what is the entry on receiving his share of the proceeds?

Lokesh debits Bank and credits Karan's account with ₹24,500, half of the ₹49,000 proceeds. The credit goes to Karan because Lokesh now owes him the amount. Lokesh is the acceptor, so he has no Bills Receivable to credit.

  1. ABank A/c Dr ₹24,500 to Karan A/c ₹24,500Correct
  2. BBank A/c Dr ₹25,000 to Karan A/c ₹25,000
  3. CBank A/c Dr ₹24,500 to Bills Receivable A/c ₹24,500
  4. DKaran A/c Dr ₹24,500 to Bank A/c ₹24,500

Explanation

Proceeds are 49,000, half is 24,500 received by Lokesh. He credits Karan, the personal account, because the amount is owed to Karan and not a trade sale. Option 2 ignores the discount. Option 3 wrongly credits Bills Receivable, though Lokesh is only the acceptor holding no receivable. Option 4 reverses the debit and credit.

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