CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange
Pooja Enterprises discounted Rs 25,000 bill of Nair with its bank for Rs 24,500. On maturity Nair dishonoured it, and the bank debited Pooja's account with Rs 25,000 plus Rs 100 noting charges. What is the debit to Nair's account in Pooja's books?
Nair's account is debited with Rs 25,100, being the full face value of Rs 25,000 plus Rs 100 noting charges. The discount of Rs 500 already charged is a sunk expense and does not reduce what Nair owes on dishonour.
- ARs 24,500
- BRs 25,000
- CRs 25,100Correct
- DRs 24,600
Explanation
The discount of Rs 500 was already charged as an expense and is not reversed. Nair owes the full bill value plus noting charges: 25,000 + 100 = 25,100. Rs 24,600 wrongly starts from the discounted proceeds.
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