A bill for Rs. 700 RETIRED by bank under a rebate of Rs. 20, the full amount of the bill was credited in the cash book.
WHAT IS THE MEANING OF THIS LINE?
In case of bill of exchange, when a bill is paid off before the due date, some discount (known as rebate) is received, therefore, less amount is paid.
For example, if a bill payable is to be discharged on 31 Mar 2014 while the debtor paid the due amount on Mar 01 2014 only, he is entitled to discount of some percentage.
Here, in Cash Book, Bill payable was credited with full amount of Rs 700 whereas actually it should be credited with Rs 680 onlly (i.e. 700 - 20).
So, accordingly, Rs 20 will be added to the balance as per Cash Book in order to rectify the mistake.
Hope this answers your query.