A bill of exchange of rs. 10000 which was previously discounted with t...
Treatment of Dishonoured Bill of Exchange in Revaluation Account
Revaluation account is a nominal account that records all the gains and losses incurred by a business during the accounting period. In case of a dishonoured bill of exchange, the revaluation account is affected in the following ways:
1. Debit Entry: The amount of the dishonoured bill of exchange is debited to the revaluation account. In this case, the amount is Rs. 10,000.
2. Credit Entry: The amount of the dishonoured bill of exchange is credited to the bank account from which it was previously discounted. In this case, the bank account will be credited with Rs. 10,000.
3. Treatment of Interest: If any interest was charged by the bank on the discounted bill of exchange, it should be debited to the revaluation account in case of dishonour.
4. Effect on Profit and Loss Account: The amount of the dishonoured bill of exchange will be treated as an expense and will be charged to the profit and loss account.
5. Effect on Balance Sheet: The amount of the dishonoured bill of exchange will be shown as a liability in the balance sheet under the head 'Sundry Creditors' or 'Bills Payable'.
Conclusion
In conclusion, the dishonour of a bill of exchange has a significant impact on the revaluation account, profit and loss account, and balance sheet. It is important for the business to record the dishonour and its effects accurately to ensure the financial statements reflect the true and fair view of the business.
A bill of exchange of rs. 10000 which was previously discounted with t...
There is a no entry in revaluation account
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.