Humble and Kind help Required

Others 619 views 2 replies

Dear students

 

Kindly explain the highlighted Answer in detail  and discloure amount in Balance Sheet as I am weak in Basics and cant understand Bills Receivable and Bills Payable adjustment

Kindly provide detail explanation to a layman like me to understand the same

Thanks in advance


Attached File : 47 book1.xls downloaded: 114 times
Replies (2)

A Ltd. is absorbed by B Ltd. hence all the B/P and B/R accepted and drawn respectively by outsiders shall be added but Bills accepted  by A ltd on B Ltd. and held by B Ltd or vice versa shall be eliminated, as it represent inter-company liability. but in the given case since A ltd has already discounted rs.20000, so it don't represent inter- company liability so it CAN NOT be eliminated , further since the Bill discounted by A ltd is originally drawn absorbed B Ltd, in case of dishonour of these bill, (even the bank will call A ltd to pay off the liability , A ltd can recover it from B Ltd ), so NO contingent liability shall be shown in Balance sheet of A & B ltd. (after absorption )

 

In the Books of A & B ltd. (after absorption )

Balance sheet as at XX. XX. XXXX
 
Liabilities  rs. Assets rs.
Bills payable
Bills Receivable
 A Ltd.  50000 A Ltd. 20000
B Ltd. 10000 B Ltd. 20000
  60000   40000

Foot Note to Balance sheet

NO Contigent Liablities for Bills Recivable Discounted 

 

 

Note: Bills Receivable in A Ltd were all discounted with Bank and therefore now Bltd is liable towards third party, i.e Bank.Hence Liability towards Bill Payable of Bltd is not cancelled

Thanks Mr Manmohan for the valuable reply given


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