CMA Intermediate · Financial Accounting · Bills of Exchange
Sharma Ltd drew a Rs 60,000 bill on Verma Bros, which Verma accepted. Before the due date Verma asks for renewal. Under the agreement the old bill is cancelled, interest of Rs 900 is charged on the old bill, Verma pays Rs 20,000 in cash immediately, and a new bill is drawn for the balance including the interest. What is the amount of the new bill?
The new bill is for Rs 40,900. Verma owes the old bill of Rs 60,000 plus Rs 900 interest, totalling Rs 60,900. After paying Rs 20,000 in cash, the balance of Rs 40,900 is covered by the new bill, because interest is added to the amount due.
- ARs 40,000
- BRs 39,100
- CRs 40,900Correct
- DRs 60,900
Explanation
Amount due = 60,000 + 900 interest = 60,900. Less cash paid 20,000 gives new bill of Rs 40,900. Rs 40,000 omits the interest, and Rs 39,100 wrongly subtracts it.
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