Deepika's acceptance for ₹12,000, payable 3 months after date, was held by Naveen. One month before the due date, Deepika retired the bill by paying it immediately in cash, and Naveen allowed a rebate of 12% p.a. for the unexpired period. Journalise the retirement in the books of

Question

Deepika's acceptance for ₹12,000, payable 3 months after date, was held by Naveen. One month before the due date, Deepika retired the bill by paying it immediately in cash, and Naveen allowed a rebate of 12% p.a. for the unexpired period. Journalise the retirement in the books of both parties.

Accepted Answer

Retirement is the mirror opposite of renewal: the drawee pays early instead of late, and in return the holder allows a rebate — effectively a discount — for the period by which payment has been advanced.

**Step 1 — Rebate for early payment.** Unexpired period = 1 month. Rebate = ₹12,000 × 12% p.a. × 1/12 = ₹120.

**Step 2 — Cash actually exchanged.** ₹12,000 − ₹120 = ₹11,880.

**In the books of Naveen (Drawer/Holder)**

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash/Bank A/c Dr | 11,880 | |
| Rebate on Bills A/c Dr | 120 | |
| To Bills Receivable A/c | | 12,000 |
| (Being the bill retired one month early; rebate of ₹120 allowed at 12% p.a.) | | |

**In the books of Deepika (Drawee/Acceptor)**

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bills Payable A/c Dr | 12,000 | |
| To Cash/Bank A/c | | 11,880 |
| To Rebate on Bills A/c | | 120 |
| (Being the bill retired one month early; rebate of ₹120 received at 12% p.a.) | | | …

Q.Deepika's acceptance for ₹12,000, payable 3 months after date, was held by Naveen. One month before the due date, Deepika retired the bill by paying it immediately in cash, and Naveen allowed a rebate of 12% p.a. for the unexpired period. Journalise the retirement in the books of both parties.

Concept understanding — Renewal and Retirement of a Bill

Particulars	Debit (₹)	Credit (₹)
Cash/Bank A/c Dr	11,880
Rebate on Bills A/c Dr	120
To Bills Receivable A/c		12,000
(Being the bill retired one month early; rebate of ₹120 allowed at 12% p.a.)

Particulars	Debit (₹)	Credit (₹)
Bills Payable A/c Dr	12,000
To Cash/Bank A/c		11,880
To Rebate on Bills A/c		120
(Being the bill retired one month early; rebate of ₹120 received at 12% p.a.)

Q.Deepika's acceptance for ₹12,000, payable 3 months after date, was held by Naveen. One month before the due date, Deepika retired the bill by paying it immediately in cash, and Naveen allowed a rebate of 12% p.a. for the unexpired period. Journalise the retirement in the books of both parties.

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