CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange
Meera & Co. discounted a Rs 60,000 bill drawn on Nitin with its bank for Rs 58,200. On the due date Nitin dishonours the bill and the bank debits Meera's account with Rs 60,000 plus Rs 500 noting charges. What is the amount debited to Nitin's account on dishonour?
Nitin's account is debited Rs 60,500. On dishonour of a discounted bill the drawer must repay the bank the face value of Rs 60,000 plus Rs 500 noting charges, and recovers that whole sum from the acceptor. The earlier discount is not reversed.
- ARs 60,500Correct
- BRs 60,000
- CRs 58,700
- DRs 61,700
Explanation
On dishonour of a discounted bill, Meera pays the bank 60,000 + 500 = 60,500. Nitin is debited with the full amount of the bill plus the noting charges, i.e. 60,500. The discount of 1,800 already charged is a sunk expense and is not reversed, so 58,700 and 61,700 are wrong.
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