Under which of the following situations, is journal entry not passed in the books of the drawer?
Correct answer: D. When a discounted bill is honoured by the drawee on the due date
- A. When a debtor accepts a bill drawn by the drawer
- B. When a bill is sent to the bank for collection
- C. When a bill is renewed at the request of the drawee
- D. When a discounted bill is honoured by the drawee on the due date
Explanation
When a discounted bill is honoured on the due date, the drawer's liability is discharged automatically through the bank, so no further entry is generally needed in the drawer's books. Collection, renewal, and acceptance situations require entries at the relevant stage.
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Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
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