Financial Accounting (BCOC-131) - Old

The main features of double entry system are:

1. Dual aspect: every transaction affects at least two accounts.
2. Equality of debit and credit: total debits equal total credits for each transaction.
3. Systematic recording: transactions are recorded in journal and posted to ledger, enabling preparation of trial balance and final accounts.

Called-up capital is that part of subscribed capital which the company has demanded (called) from shareholders. Paid-up capital is the portion of called-up capital actually received from shareholders. If some shareholders do not pay, the unpaid amount is called calls in arrears.

Bills receivable accounting shows how a debtor’s liability is converted into a bill and how it is settled or re-established on dishonour.

(i) On receiving/acceptance of bill: Bills Receivable A/c Dr. To Debtor’s A/c (Being bill received from debtor)

(ii) On discounting the bill with bank: Bank A/c Dr. (net proceeds) Discount A/c Dr. (discount charged) To Bills Receivable A/c (full amount) (Being bill discounted)

(iii) On dishonour of discounted bill: Debtor’s A/c Dr. (bill amount + noting charges, if any) To Bank A/c (Being bill dishonoured and bank debited our account; debtor again becomes liable)

If the bill was held till maturity and dishonoured, the entry is Debtor’s A/c Dr. To Bills Receivable A/c and noting charges (if paid) are also debited to debtor. Thus, dishonour restores the debtor’s liability.