IPCC Group-I Paper 1: Accounting, Chapter 8

CA.SK Chhabra

The Institute of Chartered Accountants of India

Recorded on: 1-February-2013

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This lecture has been delivered by faculty members to supplement the Study
Material, Practice Manual and other content

The views expressed in this lecture are of the Faculty Member.

The content of this video lecture has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein
may not be taken to necessarily represent the views of the Council or any of its
committees

This e-Lecture was Recorded

on:February 1, 2013

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The e-Lectures, PPT, Podcasts

and Video lectures on ICAI
Cloud Campus aim to
supplement the Study Material,
Practice Manual and
Supplementary Study Material

The lecture recordings are made

according to the syllabus and
laws existing/ applicable as on
the date of recording.

Due to changes in law, there is

likely to be some time gap
between these changes and the
recording of updated lectures.

Hence, students are advised to

refer to the Study Material
including Supplementary Study
Material, if any, and other
relevant legislation for latest
provisions/ amendments
required for forthcoming
examination.

Self Balancing Ledgers

Components/ Divisions

Accounts prepared for each Sub-Division

What is Sectional Balancing?
Formats/ Proforma of Different accounts
Accounting Entries in the books of Drawer and Drawee

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An Intro.

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Debtors Ledger or
Sales Ledger or
Sold Ledger
Also known as Subsidiary Ledgers

Creditors Ledger
Purchase Ledger or
Bought Ledger

General Ledger (Nominal Ledger)

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In the General Ledger, Two Accounts are prepared

Bought
Ledger

Sold Ledger

These ledger may be called by different names

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Debtor Ledger Adjustment A/c

(simply debtors account)
Or
Sales Ledger Adjustment A/c
Or
Sold Ledger Adjustment A/c

(In reality it is similar to total debtors account)

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Creditors Ledger Adjustment A/c

Or
Bought Ledger Adjustment A/c
Or
Purchase Ledger Adjustment A/c

(In reality it is similar to total creditors account)

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Adjustment account are also known as control

accounts. For eg.

Debtors Ledger Adjustment Account or

Debtors Ledger control account means the same thing

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In Debtors Ledger, following one account is prepared

General Ledger Adjustment Account

(reverse to total debtors account)

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In Creditors Ledger, following one account is

prepared

General Ledger Adjustment Account (reverse to

total creditors account)

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To prove the accuracy of the Sales Ledger we

maintain a Total Debtor account in the General
Ledger
Where accounts of Individual customer would be
maintained in the sales ledger,

In General Ledger the Total Debtors Account would be

posted by the total of various transaction - Total Credit
Sales, Cash Received, Total Discount Allowed etc.

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Balance in the Total Debtors Account

Should be equal to the Total of Balance shown by the

Accounts of Individual Customers

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Debtor Ledger Adjustment A/c in General Ledger

General Ledger Adjustment A/c in Debtors Ledger
Creditors Ledger Adjustment A/c in General Ledger
General Ledger Adjustment A/c in Creditors Ledger

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Particulars
To balance b/d

Rs Particulars
XX

To General Ledger Adjustment A/c

By balance b/d

Rs
XX

By General Ledger Adjustment A/c

Credit sales

XX

Cash Received

XX

B/R(Dishonored)

XX

Bank(Cheques Received)

XX

Bank(Discounted B/R
Dishonored)

XX

B/R(Drawn)

XX

XX

Sales Return

XX

Interest Charged

XX

Discount Allowed

XX

B/R(Cancelled upon renewal)

XX

Rebate/Allowance

XX

Discount Allowed

Bad debts(Transferred from

Creditors Ledger

XX

Creditors(B/R Endorsed
Dishonored)
To balance c/d (Advances from
customers at the end)
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XX

By balance c/d

XX

XX
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Particulars
To balance b/d

Rs Particulars
XX

To Debtors Ledger Adjustment A/c

By balance b/d

Rs
XX

By Debtors Ledger Adjustment A/c

Cash Received

XX

Credit Sales

XX

Bank

XX

B/R(Dishonored)

XX

B/R

XX

Bank(Discounted B/R
Dishonored)

XX

Sales Return

XX

Interest Charged

XX

Discount Allowed

XX

Rebate/Allowance

XX

B/R(Cancellation upon
Renewal

XX

Bad debts( Transferred from

Creditors Ledger

XX

Discount(Allowed)

XX

To balance c/d
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XX

By balance c/d

XX

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Particulars
To balance b/d

Rs Particulars
XX

To General Ledger Adjustment A/c

By balance b/d

Rs
XX

By General Ledger Adjustment A/c

Cash(Paid)

XX

Credit Purchases

XX

Bank(Issued)

XX

Endorsed B/R Dishonored

XX

XX

Interest Charged By
Creditors

XX

B/P (Dishonored)

XX

Discount (Disallowed)

XX

B/P
B/R(Endorsed)

XX

Purchase Returns

XX

Discount Received

XX

Rebate/Allowance

XX

To balance c/d
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XX

By balance c/d(Advances from

Suppliers at the end)

XX

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Particulars
To balance b/d

Rs Particulars
XX

To Creditor Ledger Adjustment A/c

By balance b/d

Rs
XX

By Creditor Ledger Adjustment A/c

Credit Purchases

XX

Cash(Paid)

XX

Endorsed B/R Dishonored

XX

Bank(Issued Cheques)

XX

Interest Charged By
Creditors

XX

B/P

XX

XX

B/R(Endorsed)

XX

B/P(Dishonored)

XX

Discount Received

XX

Discount(Disallowed)

Purchase Returns

XX

To balance c/d (Advances to

customers at the end)

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XX

By balance c/d

XX

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Transfer from Debtors Ledger to Creditors Ledger

or from Creditors to Debtors Ledger

Amount is reduced from Debtors and Creditors Balance

If in journal entry Debtors or Creditors Account is

Debited or Credited only then Debtor Ledger
Adjustment or Creditors Ledger Adjustment Account
are effected, otherwise it does not effect these
account

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Provisions for Doubtful Debts, Provision for

Discount on Debtors, Bad Debt Recovered, Cash
Sales & Purchase
Do not affect the Debtors Account

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Comprehensive Problem
May 1999

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You are required to prepare the Sales Ledger Adjustment account as on 31.3.2012
Debtors balance 1.3.2012
50,000
Transactions during the period were:
Sales (including cash sales of Rs. 20,000)
1,28,000
Cash received from Debtors
90,000
Discount allowed to debtors
500
Acceptances received from debtors
8,000
Returns from debtors
6,000
Bills receivable dishonoured
1,500
Bad Debts written off (after bad debts recovered Rs. 1,000) 4,000
Sundry charges debited to customers
600
Transfers to bought ledger
300

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Particulars
To balance b/d

Rs Particulars
50000

To General Ledger Adjustment A/c

Rs

By General Ledger Adjustment A/c

Cash Received

90000

Credit sales

108000

B/R(Drawn)

8000

B/R(Dishonored)

1500

Sales Return

6000

Sundry Charges

600

Discount

500

Transfer

300

Bad debts
By balance c/d

1,60,100
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5000
50300

1,60,100
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Comprehensive Problem
May 2000

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Make the Debtors Ledger Adjustment Account in the

General Ledger
Total Sales amounted to Rs.1,80,000 including the
sale of old Zerox Machine for Rs.4,800 (Book value
Rs.8,000). The total Cash sales were 80% less than
the total Credit sales
Cash collections from debtors amounted to 70% of
the aggregate of the opening debtors and Credit
sales for the period. Debtors were allowed a cash
discount of Rs20,000
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Bills receivable drawn during the three months totalled

Rs.30,000 of which bills amounting to Rs.10,000 were
endorsed in favour of suppliers. Out of the endorsed
Bills one bill for Rs.6,000 were dishonoured for nonpayment as the party became insolvent his estate
realized nothing
Cheques received from customers Rs.8,000 were
dishonoured a sum of Rs.2,000 was irrecoverable. Bad
debts written off in the earlier years realized Rs.11,000
Sundry debtors as on 1.1.2012 stood at Rs.50000

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Particulars
To balance b/d

Rs Particulars
5000

To General Ledger Adjustment A/c

Credit
sales[100/120*(1800004800)]

146000

Bank(Cheques Dishonored)

8000

B/R

6000

Creditors

6000

2,10,000
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Rs

By General Ledger Adjustment A/c

Cash Received

137200

B/R(Drawn)

30000

Discount

20000

Bad debts(6000+2000)

8000

By balance c/d

14800

2,10,000
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Comprehensive Problem
May 2002

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Prepare General Ledger Adjustment A/c in the Debtors and Creditors Ledger

Balance 1.04.2011

Dr

Cr

Debtors Ledger
Creditors Ledger
Transactions for the year ended 31.3.12
Total Sales
Cash sales
Total Purchases
Credit Purchases
Creditors paid off (in full settlement of Rs. 40,000)
Received from debtors (in full settlement of Rs. 59,000)
Returns from debtors
Returns to Creditors
Bills Accepted for Creditors

47,200
280

240
26,300
Rs.
1,20,100
8,100
89,500
67,000
39,500
58,200
2,600
1,800
5,500

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Bills Payable Matured

Bills Accepted by Customers
Bills Receivable Dishonoured
Bills Receivables Discounted
Bills Receivables Endorsed to Creditors
Endorsed Bills Dishonored
Bad-Debts Written off (after Bad-Debts Recovered Rs. 300)
Provision for Doubtful Debts
Transfer from debtors Ledger to Creditors Ledger
Transfer from Creditors Ledger to debtors Ledger
Balance on 31.3.12
Debtors Ledger (Cr.)
Creditors Ledger (Dr.)

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8,000
20,100
1,500
5000
4,000
1,000
2,200
550
1,100
1,900
380
420

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Particulars
To balance b/d

Rs Particulars
240

To Debtors Ledger Adjustment A/c

By balance b/d

Rs
47200

By Debtors Ledger Adjustment A/c

Bank

58200

Credit Sales

112000

B/R

20100

B/R(Dishonored)

1500

Sales Return

2600

Endorsed Bills

1000

Discount Allowed
Bad debts

800
2500
By balance c/d

Transfer from Debtor Ledger

To Creditor
Ledger(1900+1100)
To balance c/d(Balancing figure)

3000

74640

1,62,080
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380

1,62,080
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Particulars
To balance b/d

Rs Particulars
26300

To Creditor Ledger Adjustment A/c

By balance b/d

Rs
280

By Creditor Ledger Adjustment A/c

Credit Purchases

67000

Bank(Issued Cheques)

39500

Endorsed B/R Dishonored

1000

B/P Accepted

5500

To balance c/d

420

Discount Received

500

Purchase Returns

1800

Transfer from Debtors Ledger

To Creditors
Ledger(1900+1100)

3000

Endorsed To Creditors

4000

By balance c/d(Balancing figure)

94,720
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40140

94,720
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Comprehensive Problem
May 2003

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Prepare Sales Ledger Adjustment A/c in the General Ledger

As on 1-04-2011 balance in sales ledger
DR) Rs. 1,41,880
(CR) Rs. 2,240
As on 31.3.2012
Total Sales
7,68,000
Cash Sales
40,000
Sales Return
10,000
Cash received from customers
6,24,000
Discount allowed
11,200
Cash paid to supplier
4,80,000
Transfer from sales to bought ledger
20,800
Discount received
7,200
B/R received(B/R drawn)
40,000
Reserve for doubtful debts
9,160
Cash paid to customer
1,840
Bill received dishonored
6,000
Sales Ledger Balance (Dr.)
1,83,200

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Particulars
To balance b/d

Rs Particulars
141800

To General Ledger Adjustment A/c

Credit sales

By balance b/d

Rs
2240

By General Ledger Adjustment A/c

728000

Cash Received

624000

B/R(Dishonored)

6000

B/R(Drawn)

40000

Cash Paid to customer

1840

Sales Return

10000

Discount Allowed

11200

To balance c/d

13720
891440

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Transfer to bought ledger

20800

Bad debts(b-f)

2000

By balance c/d

181200
891440
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Comprehensive Problem
Nov 2008

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Prepare the necessary adjustment accounts as they would appear in the General Ledger
of Govind Ltd.
Closing debtors balance (per General Ledger Adjustment A/c) 60,000 Cr
Credit sales
40,000
Credit purchases
15,000
Paid to creditors
7,500
Discount allowed
1,500
Bills payable accepted
5,000
Discount received
500
Received from debtors
20,000
Bad debts
5,000
Closing creditors balance (per General Ledger adjustment A/c) 30,000Dr
Bills accepted by customers
3,000
Discount allowed to debtors Rs. 500 was recorded as discount received from creditors.

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Particulars
To balance b/d

Rs Particulars
49500

To General Ledger Adjustment A/c

Credit sales

By balance b/d

Nil

By General Ledger Adjustment A/c

40000

Cash Received

3000

Discount Allowed 1500+500

2000

By balance c/d(60000-discount)
89500

20000

B/R(Drawn)

Bad debts

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Rs

5000

59500
89500
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To be noted

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Treatment is same whether Transfer is

From Debtors Ledger to creditors Ledger or

From creditors Ledger to Debtors Ledger

Amount is reduced from balance of

Debtors and Creditors

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Provisions for

Doubtful Debts
Discount on Debtors

Bad Debt Recovered

Trade Discount Allowed/Received
B/R Discounted or B/R Matured or B/P Paid
Cash Sales
Cash Purchases

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If in journal entry Debtors or creditors account is

debited or credited

Only then Debtor Ledger adjustment or creditors ledger

adjustment account are effected, otherwise it does not
effect these account

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Entries in Books of Drawer &

Drawee

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S Particulars
.
n
o
.

B/R is
retained

B/R is
Discounte
d

B/R is
endorsed

B/R is
BOOKS OF
DRAWEE
sent to
bank for
collection

Sale of goods
on credit by
drawer(A) to
drawee(B)

Bs A/c Dr.
To
SalesA/c

Same

Same

Same

Purchase Dr
To As a/c

Acceptance of a
B/E by the
Drawee

B/R A/c Dr. Same

To Bs
A/c

Same

same

As A/c Dr.
To B/P A/c

Discounting
Endorsement/
Bills sent for
Collection by
Drawer

No Entry

Cs A/c Dr Bill Sent

To B/R for
Collectio
A/c
n A/c Dr.
To B/R
A/c

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Bank A/c
Dr.
Discount
A/c Dr.
To B/r
A/c

No Entry

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S.
no.

Particulars

B/R is
retained

B/R is
Discounte
d

B/R is
endorsed

B/R is
BOOKS OF
DRAWEE
sent to
bank for
collection

B/E
honoured on
due date

Cash A/c
Dr.
To B/R
A/c

No Entry

No Entry

Bank A/c B/P A/c Dr.

Dr.
To Cash A/c
To Bills
sent for
collection

Dishonor of
B/Eon due
date
(i)If noting
charges are
not paid

Bs A/c Dr.
To B/R
A/c

Bs A/c
Dr.
To Bank
A/c

Bs A/c
Dr.
To Cs
A/c

Bs A/c
Dr.
To Bills
sent for
Collectio
n

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B/P A/c Dr.

To As A/c

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S.
no.

Particulars

B/R is
retained

B/R is
Discounte
d

B/R is
endorsed

B/R is
BOOKS OF
DRAWEE
sent to
bank for
collection

(ii) If noting
charges are
paid

Bs A/c Dr.
[B/R +
N.C.]
To B/R
To Cash
A/c [ N.C.]

BS A/C
Dr.
[ B/R
+N.C.]
To Bank
A/c
[B/R +
N.C.]

BS A/c
Dr.
[B/R +
N.C.]
To Cs
A/c

B/P A/c Dr.

Bs A/c
Dr.
Noting Charge
A/c Dr.
[B/R +
N.C]
To As A/c
To Bills
Sent for
collection
A/c(B/R)
To Bank

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no.

Particulars

B/R is
retained

B/R is
Discounte
d

B/R is
endorsed

B/R is
sent to
bank for
collectio
n

BOOKS OF
DRAWEE

Retirement of
a B/E at a
rebate by
Drawee

Cash A/c Dr.

Rebate A/c
Dr.
To B/R A/c

No entry

No Entry

Bank A/c
Dr.
Rebate
A/c Dr.
To B/R
A/c

B/P A/c Dr.

To Cash A/c
To Rebate A/c

Renewal of a
B/E(i)
Cancellation
of old B/E

Bs A/c Dr.
To B/R A/c

Bs A/c Dr.
To Bank
A/c

Bs A/c Dr.
To Cs A/c

Bs A/c Dr.
To Bill
sent for
collection
A/c

B/P A/c Dr.

To As A/c

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no.

Particulars

B/R is
retained

(ii) Interest
Charged by
Drawer

(iii) Part
Payment by
Drawee

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B/R is
Discounte
d

B/R is
endorsed

B/R is
sent to
bank for
collectio
n

BOOKS OF
DRAWEE

Bs A/c Dr. Bs A/c

Dr.
To
Interest A/c
To
Interest
A/c

Bs A/c
Dr.
To
Interest
A/c

Bs A/c
Dr.
To
Interest
A/c

Interest A/c Dr.

To As A/c

Cash A/c
Dr.
To Bs
A/c

Cash A/c
Dr.
To Bs
A/c

Cash A/c
Dr.
To Bs
A/c

As A/c Dr.
To cash A/c

Cash A/c
Dr.
To Bs
A/c

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no.

Particulars

B/R is
retained

(iv)Acceptan
ce of a new
B/E by
drawee

B/R A/c Dr. B/R A/c

To Bs A/c
To Bs
A/c

Insolvency
BS A/c
of the
Dr.
Drawee
To B/R
(i) Dishonour A/c
of B/E

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B/R is
Discounte
d

Bs A/c
Dr.
To Bank
A/c

B/R is
endorsed

B/R is
sent to
bank for
collectio
n

BOOKS OF
DRAWEE

B/R A/c
Dr.
To Bs
A/c

B/R A/c
Dr.
To Bs
A/c

As A/c Dr.
To B/p A/c

Bs A/c
Dr.
To Cs
A/c

Bs A/c
B/P A/c Dr.
Dr.
To As A/c
To Bill
sent for
collection
A/c
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no.

Particulars

B/R is
retained

B/R is
Discounte
d

B/R is
endorsed

B/R is
sent to
bank for
collectio
n

BOOKS OF
DRAWEE

(ii) Receipt
of amount
from the
Drawee as
Final
dividend

Cash Dr.
Bad
Debts A/c
Dr.
To Bs A/c

Cash A/c
Dr. Bad
Debts A/c
Dr.
To Bs
A/c

Cash A/c
Dr.
Bad
Debts
A/c Dr.
To Bs
A/c

Cash A/c
Dr.
Bad
Debts
A/c Dr.
To Bs
A/c

As A/c Dr.
To Cash A/c
To P/L A/c
Or deficiency
A/c

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B/E Bills of Exchange; B/R Bills Receivable; B/P

Bills Payable; N/C- Noting
Charges;B=Debtor;C=Creditor
Sans Recourse means if Bill endorsed is
dishonored then there is no liability of the endorser.

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