CIE Accounting Paper-2: Specimen Questions 96 - 98 of 103

Passage

Mrs. Anthony sold goods worth £10000 to Mrs. Barker on Jan 1st 2016. Mrs. Anthony drew a bill on Mrs. Barker at three months for the full amount. Mrs. Barker accepted the bill and returned to Mrs. Anthony, who discounted the bill with a bank on 5th Feb 2016.@15 %. The bill was duly honored on maturity.

Question number: 96 (3 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How will Mrs. Barker journalize the above transactions in her books of accounts?

Explanation

Journal entries in the books of Mrs. Barker

Table of Journal entries in the books of Mrs. Barker

DATE

PARTICULARS

LF

DEBIT AMT

CREDIT AMT

Jan 1st

Purchases A/c Dr

10000

To Mrs. Anthony A/c

10000

(Being goods purchased on credit)

Jan 1st

Mrs. Anthony A/c Dr

10000

To Bills Payable A/c

10000

(Being acceptance of bill received)

April 4th

Bills Payable A/c Dr

10000

To bank A/c

10000

(Being bill discharged)

Question number: 97 (4 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What is meant by discounting the bill?

Explanation

When the holder of a bill sells the bill to a bank or any other third party, before the maturity of the bill, it is called as discounting the bill. This is done b the holder when he needs the money on immediate basis. The bank or the third party usually charges a discount for the unexpired period of the bill.

Question number: 98 (5 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What were the other options available to Mrs. Anthony other than discounting the bill with the bank?

Explanation

The other options that were available to Mrs. Anthony were as follows:

(i) Retain the bill till the due date.

(ii) Send the bill to bank for collection

(iii) Discount the bill with some third party

(iv) Endorse the bill to a creditor.

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