Discounting bills of exchange is a financial service, where the Bank purchases drawn bills, from the domestic trade transactions, confirmed in particular with an invoice – with right of recourse to you – and credits you with the amount of the bill of exchange less discount interest and additional costs related to the bill, accrued in advance from the discount date to the bill payment term.

Here amount of the bill = 50,000

Thus amount received from bank on discounting = Rs. 48,000

The charges of the bank is borne by A and B equally and on maturity A will send Rs. 25,000 to B

Recovery of bad debts is a revenue receipt.

A Bank reconciliation is a process that explains the difference between the bank balance shown in an organisation’s bank statement, as supplied by the bank, and the corresponding amount shown in the organization’s own accounting records at a particular point in time.

Such differences may occur, for example, because a cheque or a list of cheques issued by the organization has not been presented to the bank, a banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organisation’s books, or either the bank or the organization itself has made an error.

Here interest collected by bank Rs. 500 and direct deposit by a customer into his bank Rs. 2,500 will be added to the balance as per cash book.

Owner’s capital refers to the sum of the business resources owned by the business owners. It is calculated through the subtraction of assets from liabilities. When a business pays all its debts, the amount remaining belongs to the business owner and it is the one that is referred to as Owners Capital or Owners Equity.

Formulas of closing capital:
Closing capital = Opening capital + profit OR

Opening capital + profit + additional capital – drawings OR

Closing assets – closing liabilities

Here opening capital = 15,200

Further introduction of capital = 2,000

Drawings in cash = 4,800

Closing capital = 16,900

Closing capital = opening capital + profits – drawings

Profit = closing capital – opening capital – capital introduced during the year + drawings = 16,900 – 15,200 – 2,000 + 4,800 = Rs. 4,500 (profit)

The expired portion of capital expenditure is expense, unexpired is asset.

Rs. 36,400 = (1,12,000 + 6,200) less (65,000 + 6,000 + 3,000 + 6,170 + 1,630).

In case when a bill of exchange matures on a public holiday then the due date will be the preceding business day.

In this question A bill of exchange matures on 19th July. It is a public holiday. Bill will mature on the preceding day i.e.18^th july.

Remuneration paid for services is called commission. Commission is always paid on sales. Over-riding commission is an extra commission allowed to the consignee in addition to the normal commission. Such additional commission is generally allowed:

(i) To provide additional incentive to the consignee for the purpose of introducing and creating a market for a new product

(ii) To provide incentive for supervising the performance of other agents in a particular area

(iii) To provide incentive for ensuring that the goods are sold by the consignee at the highest possible price.

Here B sold 50 televisions at Rs. 15,000 per television. He was entitled to commission of Rs. 500 per television sold plus one fourth of the amount by which the gross sale proceeds less total commission there on exceeded a sum calculated at the rate of Rs. 12,500 per television sold.

Articles sold = 50

So basic commission = 500 × 50 = 25000 Rs.
Let the total commission be x(say)

Extra commission = 1/4 (sales proceeds – x – 12,500 × articles sold) = 1/4 of (7,50,000 – x – 12,500 × 50)

Or x – 25,000 = 1/4 (1,25,000 – x)

Or 4 (x – 25,000) = 1,25,000 – x

Or 4x – 1,00,000 = 1,25,000 – x

Or 5x = 2,25,000

Or x = Rs. 45,000 = total commission.

Total value of machine purchased = Rs. 1,15,000

Payment made by cheque = 10,000

Remaining amount to be paid by issue of shares = 1,05,000

Value per share including premium = Rs. 10.5

Thus number of shares to be issued = 1,05,000/10.5 = 10,000 shares

Face Value of shares issued = 10,000 × 10 = Rs. 1,00,000

Thus securities premium = 1,05,000 – 1,00,000 = Rs. 5,000

Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will of course have to pay interest for the extended period.

When a bill of exchange is dishonored, the holder can get such fact noted on the bill by a notary public. The advantages of noting is that the evidence of dishonored is secured. The noting is done by recording the fact of dishonored, the date of dishonor, the reason of dishonor, if any. For doing all this the notary public charges his fees which is called noting charges.

In case the bill is renewed the interest will not be charged on the noting charges which will be treated separately and will not be clubbed with the amount of the bill.

Here Total amount of the A’s acceptance = 8,000

Amount paid = 4,000

Amount of the renewed bill = Rs. 4,000

Interest for 3 months @12%pa = 4,000 × 12/100 × 3/12 = Rs. 120