Rebate on Bills Discounted - Banking Company Accounts

Rebate on bills discounted is a concept related to banking company accounts, specifically in advanced corporate accounting. It refers to the discount or reduction in the amount payable by the customer when they make early or prompt payment.

Explanation:

When a customer borrows money from a bank by discounting bills of exchange, they are required to repay the borrowed amount along with interest. However, if the customer makes early or prompt payment, they may be eligible for a rebate on the outstanding amount. The rebate is provided as an incentive for customers to make timely repayments and reduce the burden of interest.

Calculation of Rebate:

The calculation of the rebate amount depends on various factors, such as the terms and conditions agreed upon between the bank and the customer, the interest rate, and the duration of the loan. To determine the rebate amount, the following formula can be used:

Rebate = Principal amount (P) x Rate of interest (R) x Time (T)

In this case, the principal amount is $100,000, and the time period is one year. Let's assume the rate of interest is 5% per annum.

Rebate = $100,000 x 0.05 x 1
Rebate = $5,000

Therefore, if you pay the amount of $100,000 in just one year, you may be eligible for a rebate of $5,000.

Conclusion:

Rebate on bills discounted is an advantageous feature provided by banking companies to encourage prompt payment. The rebate amount is calculated based on the principal amount, rate of interest, and time period. In this case, paying $100,000 in one year may make you eligible for a rebate of $5,000. However, it is important to note that the specific terms and conditions may vary across different banking companies, and it is advisable to consult with the respective bank for accurate information on rebate calculations.