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Retiring a Bill Under Rebate – Paying Early! 🏃‍♂️

Scenario:

  • Bill is due on 4th April.
  • Simran has money on 1st March (1 month early).
  • She asks Raj: "If I pay now, will you give me a discount?"
  • Raj says: "Yes, take ₹50 off."
  • This discount is called Rebate.

Definition: Making payment before the due date is called Retiring the Bill. The discount allowed is called Rebate.

Journal Entries 📝

In Drawer's Books (Seller)

Rebate is an Expense (Loss).

Cash A/c      ...Dr. (Amount Received)
Rebate A/c    ...Dr. (Discount Allowed)
    To B/R A/c       (Full Bill Amount)

In Acceptor's Books (Buyer)

Rebate is an Income (Gain).

B/P A/c       ...Dr. (Full Bill Amount)
    To Cash A/c      (Amount Paid)
    To Rebate A/c    (Discount Received)
Rebate vs Discount

Discount is usually for prompt payment of debt. Rebate is specifically for early payment of a Bill of Exchange. Conceptually same, terminology different.

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 5

1. Retiring a bill means:

Dishonouring it
Paying it before due date
Renewing it
Endorsing it

💡 Final Wisdom: "Time is Money. If you pay early, you save money (Rebate). If you pay late, you pay money (Interest)." ⏳💰

Next up: Accommodation Bills - Helping a friend! 🤝

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