Rebate on bills discounted.

[Sindhuja Sivaraman]

Hello,

How the rebate on bills discounted is known as discount not earned but received in advance? 

At the end of FY, the banks having numerous  unmatured  bills. Then, the rebate on such bills are only earned but not received. Isn't it?

Please clarify. 

[prasad Nilugal]

Yes, Correct unexpired portion of such discount is carried forward to next financial year, by debiting Rebate on Discount  Bills A/c and crediting  Discount  on bills  , latter the account shown on Asset  side of Balance sheet of the Bank , in the next F.Y account  will be closed and transfer to the Discount on Bills A/c , 

 

[Sindhuja Sivaraman]

Thank you for your reply. 

Is it like an accrued income?

 

[prasad Nilugal]

Yes , Income Accrued but not received by the Bank

[Sindhuja Sivaraman]

Then it is an asset for the bank.

Why it is showed on liability side? 

Please clarify. 

[prasad Nilugal]

No ,  I have corrected above in my first  reply  as Asset side .

[Yasaswi Gomes new]

If it shows on liability, it is deferred liability.

[Sindhuja Sivaraman]

When it shows liability? 

It is an asset to the bank not yet received 

Please explain how it is a liability? 

[sabyasachi mukherjee]

Rebate on such bills are only earned.

[Sindhuja Sivaraman]

Thank you for your reply.

Please tell me the entry for recording the rebate on bills discounted. 

 

[prasad Nilugal]

Rebet on Bill Discount A/c Dr
To Discount on Bills. A/c Cr
( Discount on Bills earned but not received)

Rebet on Bills Discount A/c will be under asset side Balance sheet , and Discount on Bills A/c will be profit and loss account credit side under head Income.

[Sindhuja Sivaraman]

Thank you sir. 

But in my book this is given as exactly opposite as income received but not earned and the entry given is reversed. 

Hereby attached the image. 

Please check and confirm which is correct

Thank you 

[prasad Nilugal]

Sorry madam, when Bank discount the bill , we received Income in advance , bill amount along with rebet earn for example bill of Rs 10000/- collected by the Bank in this 10000/- discount earned rs 250 , so this 250 received in Advance which of next year therefore it's Liability, please correct and reverse entity we have to pass . above entry is incorrect  ones again sorry for wrong entry . 

so correct  entry is 

Discount  on bill  A/c  Dr 

To  Rebet  on  Discounted bills A/c  Cr 

( Discount  received   Received in advance  ) 

[Sindhuja Sivaraman]

Ok sir 

Now it's clear 

Thank you 

[Sindhuja Sivaraman]

Ok sir 

Now it's clear 

Thank you 

[Sindhuja Sivaraman]

[prasad Nilugal]

Income received in Advance is always Liability.

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