CA Foundation · Accounting · Bills of Exchange and Promissory Notes
Ravi and Sanjay draw and accept an accommodation bill of ₹40,000 for 3 months for their mutual benefit, to be shared equally. Ravi, the drawer, discounts it with a bank at ₹1,200 discount and passes half of the net proceeds to Sanjay. How much cash does Ravi send to Sanjay?
Ravi receives ₹38,800 after the ₹1,200 discount on the ₹40,000 bill. Since they share the proceeds equally, he sends Sanjay half, which is ₹19,400. Sending ₹20,000 would wrongly ignore the discount cost, which both parties must bear equally.
- A₹20,000
- B₹19,400Correct
- C₹19,000
- D₹18,800
Explanation
Net proceeds = 40,000 − 1,200 = 38,800. Equal sharing gives Sanjay 38,800 ÷ 2 = 19,400, and the discount is shared equally. Sending 20,000 ignores the discount, which is the key mistake.
Did you get it right without looking?
One question tells you little. A timed set on Bills of Exchange and Promissory Notes shows your real accuracy, how long you take and where you lose marks.
More Bills of Exchange and Promissory Notes questions
- Anil makes a promissory note for ₹80,000 in favour of Bhavna, payable after 3 months. Which of the following statements is correct about the…
- Which of the following instruments is NOT a valid promissory note under the Negotiable Instruments Act, 1881?
- Kapoor & Sons draw a bill of ₹90,000 on Verma Bros. Verma Bros. accept it. Which of the following correctly identifies the drawer, drawee an…
- Kapoor Ltd. discounted a bill of ₹40,000 with its bank at 12% per annum, 3 months before the due date. Which entry is correct in Kapoor's bo…
- Sharma drew a 4-month bill of ₹1,20,000 on Gupta, discounted it with his bank at 9% p.a. and received the proceeds. On the due date Gupta di…
- Sharma Enterprises holds a bill of ₹40,000 accepted by Verma, who becomes insolvent. His estate pays 45 paise in the rupee in full settlemen…