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CMA Intermediate · Financial Accounting · Bills of Exchange

Opening Bills Payable of Gupta Stores was Rs 48,000. During the year, it accepted new bills of Rs 1,32,000 for suppliers and paid bills of Rs 1,10,000 on maturity. One bill of Rs 14,000 was renewed by accepting a new bill for Rs 14,500 including Rs 500 interest, and the old bill was cancelled. The renewal is included in neither the Rs 1,32,000 nor the Rs 1,10,000. What is the closing balance of Bills Payable A/c?

The closing balance is Rs 70,500. Opening Rs 48,000 plus new bills Rs 1,32,000 plus the renewal bill Rs 14,500 gives Rs 1,94,500. Deduct payments of Rs 1,10,000 and the cancelled old bill of Rs 14,000. The interest of Rs 500 is included because the new bill is for Rs 14,500.

  1. ARs 70,000
  2. BRs 70,500Correct
  3. CRs 56,000
  4. DRs 70,000 plus interest of Rs 500 less, that is Rs 69,500

Explanation

Credits: opening 48,000 + new bills 1,32,000 + new renewal bill 14,500 = 1,94,500. Debits: payments 1,10,000 + old bill cancelled 14,000 = 1,24,000. Closing = 1,94,500 - 1,24,000 = Rs 70,500. Ignoring the interest in the new bill gives Rs 70,000, which is wrong because the new bill is for Rs 14,500.

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