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 Y’s acceptance = 25,000
Amount paid in cash on maturity by Y = Rs. 5,000
Amount of the renewed bill = Rs. 20,000
Interest for 3 months @12%pa = 20,000 × 12/100 × 2/12 = Rs. 400

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 = Rs. 30,000
The bill was accepted by Yash on 1st January but was discounted on 4th February so,
Amount to be paid to bank on discounting at 12% pa = 30,000 × 12/100 × 2/12 = Rs. 600

In the cases where a bill is payable at a fixed period after sight, the time is to be calculated from the date of the acceptance if it is accepted . If the instrument is made payable at the stated number of months after sight it becomes payable three days after the corresponding date of the month. If the month in which the period would change has no corresponding day, the period shall be liable to change on the last day of such month. Three days of grace must be added to it. In calculating the date at which promissory note or bill of exchange made payable a certain number of days after sight , the day of the date of presentment for acceptance or sight shall be excluded.

Thus the date which comes after adding stated number of days to the date of the bill,shall be the due date and the date of bill is excluded. And for finding the date of maturity 3 days as days of grace is added to the due date.

Here the bill was accepted on 8.12.2011. By adding 30 days to this date we get 7.1.2012. Now by adding 3 days of grace we get 10.1.2012

Consignment is the act of consigning, which is placing any material in the hand of another, but retaining ownership until the goods are sold or person is transferred. 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 cost of the goods sent on consignment = 1,00,000
Invoice price = cost + 25% = 1,00,000 + 25% of 1,00,000 = 1,25,000
Invoice price of the goods sold = 3/5th of the total invoiced goods = 3/5th of 1,25,000 = 75,000
Commission on sales = 2% on sales = 2% of 85,000 = 1,700
Overriding commission = 20% on gross sales less all commission exceeding its invoice value
Let the overriding commission be x
Total commission = 1,700 + x
Gross sales less all commission = 85,000 – 1700 – x
Overriding Commission = 20% of (85,000 – 75,000 – 1,700 – x) = x
Or 1,660 – .2x = x
Or 1.2x = 1,660
Or x = 1,383
Total commission = 1,383 + 1,700 = Rs. 3,083

Accounting Estimates involve management’s judgment of expected future benefits and obligations relating to assets and liabilities (and associated expense and income) based on information that best reflects the conditions and circumstances that exist at the reporting date. By its nature, estimates are subjective and may require frequent revisions in future. Estimates must be revised when new information becomes available which indicates a change in circumstances upon which the estimates were formed. Changes in Accounting Estimates must be accounted for prospectively in the financial statements, i.e. the effects of the change must be incorporated in the accounting period in which the estimates are revised. Therefore, carrying amounts of assets and liabilities and any associated expense and gains are adjusted in the period of change in estimate. Prospective application of changes in estimates prevents frequent revisions in prior period comparative figures which might cause unnecessary complications in respect of financial statement balances that are expected to be revised in future due to availability of new information or the experience of new events. Here the company should account for the change in estimate prospectively by allocating the net carrying amount of the machinery over its remaining useful life. No adjustment is required to restate the depreciation charge in previous accounting periods.

Consignment is the act of consigning, which is placing any material in the hand of another, but retaining ownership until the goods are sold or person is transferred. A joint venture takes place when two parties come together to take on one project.
Here the cost of goods sent on consignment = Rs. 20,000 which is the cost of consignment.
Ajay draws bill on Bijay for 80% of the cost of consignment, thus the amount of the bill drawn will be = 80% of 20,000 = Rs. 16,000.

Loss of quantity of goods in the normal course of business and inherent and thus inevitable or unavoidable, such as loss because of loading and unloading of goods, leakage, evaporation or shrinkage is known as normal loss.
The treatment of normal loss is to charge it to consignment account. The total cost of goods sent is charged to the units remaining. Value of inventory is inflated to cover the normal loss. In other words such loss is absorbed by the remaining units.
Here total cost of the oranges = 1,000 × 8 + 925 = Rs. 8,925
Since 15% loss is unavoidable
The balance oranges left = 1,000 – 15% of 1,000 = 850 Kgs
Thus cost per orange after adjusting loss will be = 8,925/850 = Rs. 10.50

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.

Commission on goods sold on invoice price = 5% of 2,00,000 = 10,000
Commission on goods sold 10% above cost = 5% of 1,10,000 = 5,500
Total commission = 10,000 + 5,500 = Rs. 15,500