The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in case of an accommodation bill, he passes an entry in addition to the usual entries. The additional entry so passed is with respect to
Correct answer: A. Remitting or receiving the amount
- A. Remitting or receiving the amount
- B. Payment of the bill on due date
- C. Discounting of the bill with the bank
- D. Sending the bill to bank for collection
Explanation
An accommodation bill has no underlying trade transaction, so the party receiving the accommodation must remit funds or receive the proceeds as agreed. This creates an additional entry for the remitting or receiving of the amount.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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