Skip to content

CMA Intermediate · Financial Accounting · Bills of Exchange

Karan Enterprises holds a Rs 40,000 bill accepted by Dev & Co. Dev & Co. becomes insolvent and the bill is dishonoured; Karan Enterprises receives 45 paise in the rupee in final settlement. The loss to be debited to Bad Debts Account in Karan's books is:

Karan Enterprises recovers 45% of Rs 40,000, which is Rs 18,000. The remainder, Rs 22,000, is irrecoverable and is debited to Bad Debts Account. Rs 18,000 is the amount received, so it is not the loss.

  1. ARs 18,000
  2. BRs 22,000Correct
  3. CRs 40,000
  4. DRs 4,000

Explanation

Amount recovered = 40,000 x 0.45 = Rs 18,000. Loss = 40,000 - 18,000 = Rs 22,000. Rs 18,000 is the amount received, 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