CA Foundation · Accounting · Bills of Exchange and Promissory Notes
Sharma Traders endorsed a ₹45,000 bill received from Verma to its creditor Khan in full settlement. Verma's bill is dishonoured at maturity, and Khan pays noting charges of ₹500 and debits Sharma's account. What is the entry in Sharma Traders' books on being informed of the dishonour?
Sharma Traders debits Verma ₹45,500 and credits Khan ₹45,500. The dishonour revives the debt to Khan, including noting charges, and Sharma recovers the full amount from Verma, the acceptor.
- ADebit Verma ₹45,500; credit Khan ₹45,500Correct
- BDebit Khan ₹45,500; credit Verma ₹45,500
- CDebit Verma ₹45,000; credit Khan ₹45,000
- DDebit Bills Receivable ₹45,500; credit Khan ₹45,500
Explanation
Sharma's liability to Khan revives, so Khan is credited with ₹45,000 + ₹500 = ₹45,500. Sharma can recover this from Verma, the acceptor, so Verma is debited ₹45,500. Option C ignores the noting charges.
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