Question

Study the following case/situation and express your opinion

Shirish shifted some furniture to his office and issues a cheque of Rs. 20000/- to MV Movers Limited. Balance in his account is Rs. 15000 still bank clears the cheque. Shirish also wants to renovate his office so he applies for a loan of Rs. 25 lacs which bank sanctions and transfer the amount to loan account. But Shirish withdrew only Rs. 15 lacs. Shirish accepted a bills of exchange for Rs. 5 lacs drawn upon him by M/s. Creative Furnitures for supplying new furniture for his office it is due on 31st May, 2021 but M/s. Creative Furnitures needed money on 1st April, 2021. They got Rs. 4.75 lacs from the bank on the basis of the same bills of exchange.

1. Name the type of account Shirish must be operating
2. On which amount Shirish will have to pay interest on loan?
3. Which service did the bank make available to easy M/s. Creative Furnitures while paying rupees 4.75 lacs?

Answer 1

1. Shirish must be operating a current account. Such account is usually operated by businessmen, companies, corporations, public bodies, trusts or any other commercial organisation. 
2. Shirish will have to pay interest on Rs. 25 lacs. This is because although he has withdrawn only Rs. 15 lacs, the bank has transferred the entire amount of Rs. 25 lacs to his loan account. 
3. The bank provided the facility of ‘discounting of bills of exchange’. The drawer of bills of exchange (or beneficiary) can discount the bill with bank to obtain an advance amount. At the time of maturity, the bank will recover the amount from the drawee.