Q.Harika received a bill for ₹25,000 accepted by Chandu, payable 3 months after date. Harika immediately discounted the bill with her bank at 10% p.a. for the unexpired period of 2 months. Journalise the discounting in the books of Harika, and the eventual honour in the books of Chandu.

Discounting a bill with a bank means selling it before maturity for immediate cash, less a discount charge for the remaining period; the acceptor's own liability and payment amount stay unchanged. …

Discounting converts a bill into immediate cash by selling it to a bank before its due date; the bank deducts its charge, called the discount, for the period from the date of discounting to the due date — here, the 2 months still left to run.

Step 1 — Discount charge. Discount = ₹25,000 × 10% p.a. × 2/12 = ₹416.67, rounded to ₹417 for the journal entry.

Step 2 — Net proceeds. ₹25,000 − ₹417 = ₹24,583.

In the books of Harika (Drawer/Holder)

No entry is needed in Chandu's books at the time of discounting — his liability is unaffected by who currently holds the bill.

In the books of Chandu (Drawee/Acceptor)

Calculating the discount on the full 3-month term instead of only the 2 months remaining unexpired at the time of discounting; and wrongly passing an entry in the drawee's books at the p …