Question

State the impact of 'Bills Receivable discounted dishonoured on the due date' on the liquid ratio of 0.75:1. Also give reason in support of your answer.

Answer 1

Answer:

S.No Items Effect Explanation

1 Discounted a bills receivable of

Rs 10,000 from the bank. Bank charged

discount of Rs 200. Decrease Discounting a B/R from bank reduces

asset by Rs 10,000 (B/R) and increases

asset by Rs 9,800 (bank balance)

2 A bill receivable Rs 8,000 discounted

with the bank was dishonoured No Change Dishonour of discounted B/R. results in an increase in asset (debtors) and

the decrease in asset (Bank) with the same amount

3 Cash deposited into bank Rs 7,000 No Change Increase in one asset (bank) with a simultaneous decrease in other current assets (cash) leaves current ratio unaffected.

4 Paid cash Rs 5,000 to the creditors Increase Payment of current liabilities

(creditors) will improve the current ratio from 1.67 (2.5: 1.5) to 2 (2: 1).

Answer 2

hey friend

When a bill of exchange discounted with a bank gets dishonoured at the due date, in that case, the following entry is recorded. L.F. This entry implies that on dishonour the drawee again becomes the debtor of the drawer and bank becomes the creditor of the drawer (due to non-payment by drawee on due date)

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