alleryDrawer A receives bill from drawee B and endorses to creditor C. On dishonour:
AA debits B, credits C
BA debits C, credits B
CA debits B, credits cash
DNo entry made by A
Answer & Solution
Correct answer: A. A debits B, credits C
1. A's liability to C is reinstated because C had not received payment.
2. A debits B (now liable to A) and credits C (liability to creditor restored).
3. Cash account is unaffected because A never paid C cash.
_Source: ICAI BoS Foundation Paper 1, Ch 6 "Bills of Exchange", §4 endorsement dishonour_
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