ACCOUNTANCY XI

Bill of Exchange

Concepts covered in this chapter –

  • Meaning of Bill of Exchange
  • Parties to a Bill of Exchange
  • Promissory Note
  • Parties to a Promissory Note
  • Advantages of Bill of Exchange
  • Maturity of Bill
  • Discounting of Bill
  • Endorsement of Bill
  • Accounting Treatment
  • In the Books of Acceptor/Promissor

1. Name any two types of commonly used negotiable instruments.

1. Promissory Notes

2. Cheques

2. Write two points of distinction between bills of exchange and promissory note.

Basis of Distinction Bills of Exchange Promissory Note
Drawn by Creditor Debtor
Parties Involved Three parties are involved which are drawer, payee and drawee. It involves two parties which are payee and drawer/maker.

3. State any four essential features of bill of exchange.

The following four features are considered essential for a bill of exchange:

1. The bill of exchange must be in writing

2. A bill of exchange should contain an unconditional order to pay.

3. Drawer of the bill must sign the bill.

4. The amount and the expiry date should be mentioned specifically in the bill of exchange.

4. State the three parties involved in a bill of exchange.

A bill of exchange involves three parties and they are:

1. Drawer/Maker/Holder- Responsible for issuing the bill

2. Payee/Holder- The person who will receive the payment

3. Drawee/Acceptor- One who has to accept the bill

5. What is meant by maturity of a bill of exchange?

The date where the bill is ready for payment is called as maturity of a bill. The date of maturity is arrived after adding 3 days of grace to the due date as per terms of the bill. The concept of due date will further help you in understanding maturity of a bill. It consists of following terms

1. Bill at Sight: This type of bill is due as and when it is presented.

2. Bill after Sight: In this type of bill the due date is calculated from the date the debtor accepts the bill plus the period as per terms of the bill. Maturity date is calculated by adding 3 days to the due date.

3. Bill after Date: In this type of bill, the due date is calculated from the date on which bill is drawn plus the period as per terms of bill. Maturity date is calculated adding 3 days to the due date.

Exceptions to maturity of bill: If the due date of the bill falls on a national holiday (like Independence Day) or on a Sunday, at that time the bill due date is counted one day prior to the original date and if the due date fall on a emergency holiday (like nationwide strike) at that time the bill due date is counted one day later.

6. What is meant by dishonour of a bill of exchange?

The situation where the drawee of the bill of exchange is unable to process the payment as per the maturity date of the bill, it is known as dishonour of bill of exchange. With this liability of the acceptor is re-established and he/she becomes a debtor again. To reflect the changes, the receipt of bill of exchange should be reversed.

7. Name the parties to a promissory note

Two parties are involved in promissory note:

1. Maker/Drawer, Also known as promisor, is the one who is the maker of the note and is the one responsible to pay the sum as mentioned on promissory note.

2. Promisee or Payee is the one who will be receiving the payment.

8. What is meant by acceptance of a bill of exchange?

A bill of exchange drawn by a creditor upon debtor involves an unconditional order to pay in writing, but the same must be accepted by the debtor or someone on his/her behalf in order to make the debtor liable to pay. It is a draft before acceptance by debtor. So once the debtor has written the term “accepted” and signed the document, it is then known as bill of exchange and this process is called acceptance of bill of exchange.

9. What is Noting of a bill of exchange.

A bill of exchange is said to be dishonoured when the drawee is unable to make the payment upon presenting of the bill by drawer. To retain a legal evidence of the dishonoured bill, notary public needs to record it. The charges levied by notary public for recording the failed transaction is called noting charges and the process of recording is referred to as noting.

10. What is meant by renewal of a bill of exchange?

A bill of exchange is said to be renewed when the debtor/acceptor have insufficient funds to pay the drawer and hence requests for time extension in order to make payment. A new bill of exchange is drawn on being agreed by the drawer of the bill. This process is called renewal of bill of exchange. The bill gets renewal only if the drawee agrees to pay a certain rate of interest as decided for the period of extension.

11. Give the performa of a Bills Receivable Book.

Serial Number of Bill Date Received Date of Bill Received From Whom
Drawer Acceptor Where payable Term Due date Ledger Folio Amount Cash Book Folio Remarks

12. Give the performa of a Bills Payable Book.

Serial Number of Bill Date of Bill Given To Whom
Drawer Payee Payable Where
Term of Bill
Due Date Ledger Folio Amount Paid Date Cash Book Folio Remarks

13. What is retirement of a bill of exchange?

When a drawee of bill of exchange has adequate funds and requests the drawer to accept the payment before maturity date, and once the drawer accepts, it is known as retirement of the bill of exchange as the bill of exchange is closed before maturity.

14. Give the meaning of rebate.

The discount received by a drawee from the holder on advance payment of the bill of exchange to the holder (before due date or maturity date) is known as rebate.

15. Give the performa of a Bill of Exchange.

The following is a performa of bill of exchange

Mr. Y (Drawer)₹ 10,000 BengaluruJuly 10, 2019
One month after date pay to me or my order, the sum of rupees ten thousand only, for value received
https://img-nm.mnimgs.com/img/study_content/curr/1/13/17/2370/14257/Gr11_Acc_NCERT_TQ_Chap8_DP_Ami_mal_html_26f72040.gifAccepted

(Signed)

To

Mr. W (Drawee)

July 10, 2019

J.P Nagar, Bengaluru

560078

(Signed)Mr. Y

Brigade Road, Bengaluru

560001


Long Answers

1. A bill of exchange must contain an unconditional promise to pay. Do you agree with a statement?

The Negotiable Instrument Act, 1881 defines bill of exchange as, “A bill of exchange is defined as an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”

One of the most significant feature of a negotiable instrument is an unconditional order to pay. The drawee cannot add any conditions such as payment will be done only if debtors pay or business makes profit.

A bill of exchange must contain an unconditional order to pay for the following reasons:

1. To avoid any kind of conflict at the time of payment

2. To provide security to the creditor and also bound the debtor to pay the amount.

3. To comply with The Negotiable Instruments Act, 1881.

2. Briefly explain the effects of dishonour and noting of a bill of exchange.

When the drawee of the bill of exchange is unable to complete the payment on the date of maturity of the bill, it is known as dishonour of bill of exchange. With this liability of the acceptor is re-established and he/she becomes a debtor again. To reflect the changes, the receipt of bill of exchange should be reversed.

The following entries will be made in books of holder/drawer (Nonpayment of noting charges):

Drawee A/c Dr.
To Bills Receivable A/c
(Bill of exchange dishonoured)

Entry in the books of drawee:

Bills Payable A/c Dr.
To Drawer
(Bill of exchange dishonoured)

Notary public charges a fee for keeping proof a dishonoured bill. These charges are beared by the drawee of the bill.

Following piece of information are noted by the notary public.

1. Amount and date of the bill

2. Possible Reason for dishonouring of bill

3. Fees charged for Noting

Entries of noting charges in the books of drawer (Payment done for noting charges):

Drawee Dr.
To Bills Receivable A/c
To Cash A/c (Noting charges)
(Bill of exchange dishonoured and Noting charges paid)

In the books of drawee:

Bills Payable A/c Dr.
Noting charges A/c Dr.
To Drawer
(Bill of exchange dishonoured and Noting charges due)

3. Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.

The following steps discusses the procedure of calculating bill of exchange maturity date:

1. Determine the due date of the bill as per terms of bills of exchange.

2. Grace period of three days must be added to the due date to arrive at maturity date.

For e.g., a bill having due date of 30 days (a month) is drawn on 1st August then due date is 1st September. Adding 3 grace period we arrive at bill maturity and payment due date which is on 4th October.

Calculation of Days of grace period depends on these situations:

1. Known Holidays: If due date for payment falls on a national holiday or on a Sunday, then payment need to be processed the following day. The following examples will make it easier to understand.

  1. A bill that is drawn on 23rd December with due date of 23rd January, adding the grace period (3 days) the maturity date comes to 26th January. However, as 26th January is a national holiday; so, 25th January becomes the due date for payment.
  2. A bill is drawn on 1st June with maturity period of a month, the due date arrived is 1st July. On adding 3 days of grace, the payment due date is 4th July. However, if 4th July is a Sunday, in this case payment needs to be completed on 3rd July.

2. Unexpected holidays: If due date for payment falls on an holiday due to emergency, then the next day becomes the day on which payment needs to be done. For example, a bill drawn on 1st May with a term of 20 days, then, adding grace period of 3 days, the payment due date becomes 24th May. But, if a nationwide strike gets declared on 24th May, then 25th May is the new due date for the payment of the bill as per rules.

4. Distinguish between bill of exchange and promissory note.

The points of comparison are as follows:

Basis of Comparison Bills of Exchange Promissory Note
What it contains It contains an order to pay It contains a promise to pay
Parties It involves three parties which are : drawer, payee and acceptor It involves two parties and they are: maker/drawer and payee
Drawn by Creditor Debtor
Acceptance Acceptance required by the debtor Being drawn by promissor, it requires no acceptance
Payee The same person can be payee and drawer Promissor and Payee cannot be same
Noting in case of dishonour Dishonouring of the instrument, leads to noting of the bill No requirement of noting
Liability Liability does not rest with the drawer primarily Promissor is primarily responsible

5. Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.

Retirement of bill of exchange happens when the holder of the bill of exchange receives a payment from acceptor before the accepted maturity date of the bill. In such cases the bill holder provides some discount to the acceptor and such a discount offered is called “rebate”.

The following are the benefits of retiring of a bill of exchange for debtor and creditor:

1. Improves the trust between two parties in transaction, namely, debtor and creditor.

2. Allows creditor to use the money for further business

3. Rebate provided by creditor becomes revenue for debtor

4. More business transactions can be conducted between two parties.

6. Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.

In day to day operations, a business receives many bills. Maintaining a journal for all such bills is a cumbersome task. In this case, a specialized book is created which keeps record of all such bills that are received from the debtors. This book contains all the necessary information such as bill date, due date, amount, debtors name and it is summed up on a periodical basis and the balance thus obtained is transferred to debit side of the bills receivable account.

Maintaining a bills receivable book has following benefits:

1. All information pertaining to the bills receivable, such as due date, amount, etc., get recorded in one place, thereby makes it easy to access the records.

2. Likelihood of fraud is greatly minimized as bills are recorded in one place.

3. Higher level of liability and obligation exists on the person maintaining the accounts. If any error is spotted, it can be rectified easily.

4. Time of the accountant is saved as recording of transactions are recurring and similar in nature.

5. As it is a particular book only dealing with bills receivable, it is easy to locate all details pertaining to a specific bill of exchange.

7. Briefly explain the benefits of maintaining a Bills Payable Book and state how is its posting is done in the ledger?

Maintaining bills payable book has following benefits:

1. Quick, efficient and accurate recording of business transactions.

2. Minimizes the chances of fraud as all the bills are recorded at one place

3. A high degree of accountability and answerability on part of the accountant is observed as all the transactions get verified by the same person which leads to easy detection and rectification of errors.

4. As information is documented by an individual, it improves the division of labour and efficiency of organization.

Procedure of posting to ledger:

The recordings from the Bills Payable Book are posted to the accounts of the creditors who received acceptance from the debtors. These books are then totaled periodically and credited to the Bills Payable Account in the ledger.


Numerical Answers

1. On Jan 01, 2016 Rao sold goods ₹ 10,000 to Reddy. Half of the payment was made immediately and for the remaining half Rao drew a bill of exchange upon Reddy payable after 30 days. Reddy accepted the bill and returned it to Rao. On the due date Rao presented the bill to Reddy and received the payment. Journalise the above transactions in the books Rao and prepare of Rao’s account in the books of Reddy.

The transactions are journalized below:

Books of Rao
Journal 
Date Particulars L.F. DebitAmount

CreditAmount

2016
01 Jan Reddy Dr. 10,000
To Sales A/c 10,000
(Goods tradedto Reddy)
01 Jan Cash A/c Dr. 5,000
To Reddy 5,000
(Cash received from Reddy)
01 Jan Bills Receivable A/c Dr. 5,000
To Reddy 5,000
(Bill received for 30 days accepted by Reddy)
03 Feb Cash A/c Dr. 5,000
To Bills Receivable A/c 5,000
(Reddy’s acceptance met on due date)
Books of Reddy
Rao’s Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
01 Jan Cash 5,000 2016
01 Jan Bills Receivable 5,000 01 Jan Purchases 10,000
10,000 10,000

2. On Jan 01, 2016, Shankar purchased goods from Parvati for ₹ 8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary Journal entries in the books of Parvati and Shankar.

The necessary journal entries are as follows:

Books of Parvati
 Journal
Date Particulars L.F. DebitAmount

CreditAmount

2016
01 Jan Shankar Dr. 8,000
To Sales A/c 8,000
(Sold goods to Shankar)
01 Jan Bills Receivable A/c Dr. 8,000
To Shankar 8,000
(Shankar sent Promissory Note forthree months)
05 Apr Cash A/c Dr. 8,000
To Bills Receivable A/c 8,000
(Cash received for Promissory Note one day after theMaturity date on account of holiday declared by Govt.)
Books of Shankar
Journal 
Date Particulars L.F. DebitAmount

CreditAmount

2016
01 Jan Purchases A/c Dr. 8,000
To Parvati 8,000
(Goods purchased from Parvati)
01 Jan Parvati Dr. 8,000
To Bills Payable A/c 8,000
(Promissory note for three months sent to Parvati)
05 Apr Bills Payable A/c Dr. 8,000
To Cash A/c 8,000
(Cash paid on maturity of promissory note)

3. Vishal sold goods for ₹ 7,000 to Manju on Jan 05, 2016 and drew upon her a bill of exchange payable after 2 months. Manju accepted Vishal’s draft and handed over the same to Vishal after acceptance. Vishal immediately discounted the bill with his bank@12% p.a. On the due date Manju met her acceptance. Journalise the above transactions in the books of Vishal and Manju.

The transactions are journalized as follows:

Books of Vishal 
Journal
Date Particulars L.F. DebitAmount 

Credit Amount 

2016
05 Jan Manju Dr. 7,000
To Sales A/c 7,000
(Good Manju)
05 Jan Bills Receivable A/c Dr. 7,000
To Manju 7,000
(Manju’s acceptance received for two months)
05 Jan Bank A/c Dr. 6,860
Discount A/c Dr. 140 7,000
To Bills Receivable A/c
(Bill Receivable discounted with the bank @ 12 % p.a. for two months)
Books of Manju 
Journal
Date Particulars L.F. Debit Amount

CreditAmount

2016
05 Jan Purchases A/c Dr. 7,000
To Vishal 7,000
(purchasing from Vishal)
05 Jan Vishal Dr. 7,000
To Bills Payable A/c 7,000
(Bill drawn by Vishal acknowledged)
08 Mar Bills Payable A/c Dr. 7,000
To Bank A/c 7,000
(Bill Payable Amount paid to bank on maturity)

4. On 01 Feb, 2016, John purchased goods for ₹ 15,000 from Jimmi. He immediately made a payment of ₹ 5,000 by cheque and for the balance accepted the bill of exchange drawn upon him by Jimmi. The bill of exchange was payable after 40 days. Five days before the maturity of the bill, Jimmi sent the same to his bank for collection. The bank duly presented the bill to John on the due date who met the bill. The bank informed the same to Jimmi. Prepare John’s account in the books of Jimmi and Jimmi account in the books of John.

The entries are shown below:

Books of Jimmi
Journal
Date Particulars L.F. DebitAmount

CreditAmount

2016
01 Feb John Dr. 15,000
To Sales A/c 15,000
(Goods traded to John)
01 Feb Bank A/c Dr. 5,000
To John 5,000
(Cheque acknowledged for ₹ 5,000 from John)
01 Feb Bills Receivable A/c Dr. 10,000
To John 10,000
(Bill received from John for 40 days)
10 Mar Bill Sent for Collection A/c Dr. 10,000
To Bills Receivable A/c 10,000
(John’s approval sent to bank for collection)
15 Mar Bank A/c Dr. 10,000
To Bill Sent for Collection A/c 10,000
(John’s approval met on due date and bankgot the payment)
Ledger John’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2016 2016
01 Feb Sales 15,000 01 Feb Bank 5,000
01 Feb Bills Receivable 10,000
15,000 15,000
Books of John
Journal
Date Particulars L.F. Debit Amount 

CreditAmount

2016
01 Feb Purchases A/c Dr. 15,000
To Jimmi 15,000
(Goods purchased from Jimmi)
01 Feb Jimmi Dr. 5,000
To Bank A/c 5,000
(Cheque payment done to Jimmi)
01 Feb Jimmi Dr. 10,000
To Bills Payable A/c 10,000
(Bill drawn by Jimmi acknowledged for 40 days)
15 Mar Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
(Payment of bill done on maturity to bank)
Ledger Jimmi’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2016 2016
01 Feb Bank 5,000 01 Feb Purchases 15,000
01 Feb Bills Payable 10,000
15,000 15,000

5. On Jan 15, 2015, Kartar Sold goods for ₹ 30,000 to Bhagwan and drew upon him three bills of exchanges of ₹ 10,000 each payable after one month, two month, and three months respectively. The first bill was retained by Kartar till its maturity. The second bill was endorsed by him in favour of his creditor Ratna and the third bill was discounted by him immediately @ 6% p.a. All the bills were met by Bhagwan. Journalise the above transactions in the books of Kartar and Bhagwan. Also prepare ledger accounts in books of Kartar and Bhagwan.

The solution is as follows:

Journal Entries in the Books of Kartar
Date Particulars L.F. Debit Amount 

Credit Amount 

2015
15 Jan Bhagwan Dr. 30,000
To Sales A/c 30,000
( Goods traded to Bhagwan)
15 Jan Bills Receivable A/c Dr. 10,000
To Bhagwan A/C 10,000
(Three bills of ₹ 10,000 each, received fromBhagwan)
15 Jan Ratna Dr. 10,000
To Bills Receivable A/c 10,000
(₹ 10,000 bill from Bhagwan endorsed to Ratna)
15 Jan Bank A/c Dr. 9,850
Discount A/c Dr. 150
To Bills Receivable A/c 10,000
(B/R discounted)
19 Feb Cash A/c Dr. 10,000
To Bills Receivable A/c 10,000
(First bill for one month paid by Bhagwan, on due date)
Bhagwan’s Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Jan Sales A/c 30,000 15 Jan Bills Receivable A/c 30,000
30,000 30,000
Ratna’s Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Jan Bills Receivable A/c 10,000 15 Jan Balance b/d 10,000
10,000 10,000
Bills Receivable Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Jan Bhagwan 30,000 15 Jan Ratna 10,000
15 Jan Bank A/c 9,850
15 Jan Discount A/c 150
19 Feb Cash 10,000
30,000 30,000
Cash Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
19 Feb Bills Receivable 10,000 19 Feb Balance c/d 10,000
10,000 10,000
Bank’s Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Jan Bills Receivable 9,850 15 Jan Balance c/d 9,850
9,850 9,850
Journal Entries in the Books of Bhagwan
Date Particulars L.F. DebitAmount

CreditAmount

2015
15 Jan Purchases A/c Dr. 30,000
To Kartar 30,000
(Good bought from Kartar on credit)
15 Jan Kartar Dr. 30,000
To Bills Payable A/c 30,000
(Three bill ₹ 10,000 each drawn by Kartar–Accepted and  returned them to Kartar)
19 Feb Bills Payable A/c Dr. 10,000
To Cash A/c 10,000
(First bill payment completed on due date)
19 Mar Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
(Second bill payment completed on due date to Ratna)
19 Apr Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
(Third bill payment completed on due date to bank)
Kartar’s Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Jan Bills Payable A/c 30,000 15 Jan Purchases 30,000
30,000 30,000
Bills Payable Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
19 Feb Cash A/c 10,000 15 Jan Kartar 30,000
19 Mar Bank A/c 10,000
19 Apr Bank A/c 10,000
30,000 30,000
Cash Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
19 Feb Balance b/d 10,000 19 Feb Bills Payable A/c 10,000
10,000 10,000
Bank’s Account
Dr. Cr.
Date Particulars J.F. Amount(₹) Date Particulars J.F. Amount(₹)
2015 2015
15 Mar Balance b/d 20,000 19 Mar Bills Payable A/c 10,000
19 Apr Bills Payable A/c 10,000
20,000 20,000

6. On Jan. 01, 2016 Arun sold goods for ₹ 30,000 to Sunil. 50% of the payment was made immediately by Sunil on which Arun allowed a cash discount of 2%. For the balance Sunil drew a promissory note in favour of Arun payable after 20 days. Since, the date of maturity of bill was a public holiday, Arun presented the bill on a day, as per the provisions of Negotiable Instrument Act which was met by Sunil. State the date on which the bill was presented by Arun for payment and journalise the above transactions in the books of Arun and Sunil.

The transactions are journalized as follows:

Journal Entries in the Books of Arun
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
01 Jan Sunil Dr. 30,000
To Sales A/c 30,000
(Goods traded to Sunil)
01 Jan Cash A/c Dr. 14,700
Discount Allowed A/c Dr. 300
To Sunil 15,000
(50% due from Sunil received and2% Cash Discount allowed to Sunil)
01 Jan Bills Receivable A/c Dr. 15,000
To Sunil 15,000
(Promissory note established for 20 days from Sunil)
23 Jan Cash A/c Dr. 15,000
To Bills Receivable A/c 15,000
(Cash received from Sunil beforeMaturity)
Journal Entries in the Book of Sunil
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Jan Purchases A/c Dr. 30,000
To Arun 30,000
(Goods purchased from Arun)
01 Jan Arun Dr. 15,000
To Cash A/c 14,700
To Discount Received A/c 300
(50% amount due to Arun paid by cheque and 2%  discount allowed by Arun)
01 Jan Arun Dr. 15,000
To Bills Payable A/c 15,000
(Promissory note issued in favour of Arun for twenty days)
23 Jan Bills Payable A/c Dr. 15,000
To Cash A/c 15,000
(Promissory note fullfilled one day before the maturity day)

7. Darshan sold goods for ₹ 40,000 to Varun on 8.1.2016 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date the bill was met by Varun. Record the necessary Journal entries in the books of Darshan and Varun in the following circumstances.

· When the bill was retained by Darshan till the date of its maturity.

· When Darshan immediately discounted the bill @ 6% p.a. with his bank.

· When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

· When three days before its maturity, the bill was sent by Darshan to his bank for collection.

The entries are shown below:

(i)

Books of Darshan
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
08 Jan Varun Dr. 40,000
To Sales A/c 40,000
(Goods traded to Varun)
08 Jan Bills Receivable A/c Dr. 40,000
To Varun 40,000
(Bill of Exchange duly accepted and returned by Varun)
11 Mar Cash A/c Dr. 40,000
To Bills Receivable A/c 40,000
(Payment for B/R received for B/R)
Books of Varun
Date Particulars L.F Debit ₹ Credit₹
2016
08 Jan Purchases A/c Dr. 40,000
To Darshan 40,000
(Goods purchased from Darshan)
08 Jan Darshan Dr. 40,000
To Bills Payable A/c 40,000
(Bill of two months accepted for Darshan)
11 Mar Bills Payable A/c Dr. 40,000
To Cash A/c 40,000
(Varun cleared his payment on the due date)

(ii)

Books of Darshan
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
08 Jan Varun Dr. 40,000
To Sales A/c 40,000
(Goods traded to Varun)
08 Jan Bills Receivable A/c Dr. 40,000
To Varun 40,000
(B/R received from Varun for two months)
08 Jan Bank A/c Dr. 39,600
Discount A/c Dr. 400
To Bills Receivable A/c 40,000
(B/R discounted from bank @ 6 p.a.)
Books of Varun
Date Particulars L.F. Debit ₹ Credit₹
2016
08 Jan Purchases A/c Dr. 40,000
To Darshan 40,000
(Goods purchased from Darshan)
08 Jan Darshan Dr. 40,000
To Bills Payable A/c 40,000
(Bill of two months accepted for Darshan)
11 Mar Bills Payable A/c Dr. 40,000
To Bank A/c 40,000
(Varun cleared his payment on thedue date)

(iii)

Books of Darshan
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
08 Jan Varun Dr. 40,000
To Sales A/c 40,000
(Goods traded to Varun)
08 Jan Bills Receivable A/c Dr. 40,000
To Varun A/c 40,000
(Varun’s approval received for two months)
08 Jan Suresh A/c Dr. 40,000
To Bills Receivable A/c 40,000
(Varun’s approval endorsed in favour of Suresh)
Books of Varun
Date Particulars L.F Debit ₹ Credit₹
2016
08 Jan Purchases A/c Dr. 40,000
To Darshan 40,000
(Goods purchased from Darshan)
08 Jan Darshan Dr. 40,000
To Bills Payable A/c 40,000
(Bill drawn by Darshan accepted for two months)
11 Mar Bills Payable A/c Dr. 40,000
To Cash A/c 40,000
(Bill paid to the holder of bill)

(iv)

Books of Darshan
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
08 Jan Varun A/c Dr. 40,000
To Sales A/c 40,000
(Goods traded to Varun)
08 Jan Bills Receivable A/c Dr. 40,000
To Varun A/c 40,000
(Bill of Exchange duly accepted and returned by Varun)
08 Mar Bill Sent for Collection A/c Dr. 40,000
To Bills Receivable A/c 40,000
(Bill of Exchange sent for collection to bank)
11 Mar Bank A/c Dr. 40,000
To Bill Sent for Collection A/c 40,000
(Bill of Exchange matured and duly collected on date of maturity)
Books of Varun
Date Particulars L.F. Debit Amount 

Credit Amount 

2016
08 Jan Purchases A/c Dr. 40,000
To Darshan 40,000
(Goods purchased from Darshan)
08 Jan Darshan Dr. 40,000
To Bills Payable A/c 40,000
(Bill of Exchange duly accepted and returned to Darshan)
11 Mar Bills Payable A/c Dr. 40,000
To Bank A/c 40,000
(Bill of Exchange matured and duly cleared on date of maturity)

8. Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan traders, who runs a retail shop made the following purchases from Bansal Traders.

Date Amount

21 Dec, 2016 1,000

26 Dec, 2016 1,200

Dec.18, 2016 2,000

31 Dec, 2016 5,000

For all the purchases Mohan Traders drew promissory note in favour of Bansal Traders payable after 30 days. The promissory note for the sale of Dec. 21, 2016 was retained by Bansal Traders with them till the date of its maturity. The promissory note drawn on 26.12.2016 was discounted by Bansal Traders from their bank at 12% p.a. The promissory note drawn on Dec. 28, 2016 was endorsed by Bansal Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to ₹ 1,900. On 25.1.2017 Bansal Traders sent the promissory note drawn on Dec. 31, 2016 to their bank for collection. All the promissory notes were met by Mohan Traders. Record the necessary journal entries for the above transactions in the books of Bansal Traders and Mohan Traders and prepare Mohan Traders account in the books of Bansal Traders and Bansal Traders account in the books of Mohan Traders.

The necessary journal entries are as follows:

Journal Entries in the Books of Bansal Traders
Date Particulars L.F. Debit ₹ Credit₹
2016
21 Dec Mohan Traders Dr. 900
To Sales A/c 900
(Goods traded to Mohan Traders list price ₹1,000 at 10% trade discount)
2016
21 Dec Bills Receivable A/c Dr. 900
To Mohan Traders 900
(Promissory note established from Mohan Traderspayable after 30 days)
2016
26 Dec Mohan Traders Dr. 1,080
To Sales A/c 1,080
(Goods traded to Mohan Traders list price ₹1,200 at 10% trade discount)
2016
26 Dec Bills Receivable A/c Dr. 1,080
To Mohan Traders 1,080
(Promissory note  received from Mohan Traders)
2016
26 Dec Bank A/c Dr. 1,071
Discount A/c Dr. 9
To Bills Receivable A/c 1,080
(Promissory note discounted from the Bank)
2016
28 Dec Mohan Traders A/c Dr. 1,800
To Sales A/c 1,800
(Goods traded to Mohan Traders list price ₹2,000 at 10% trade discount)
2016
28 Dec Bills Receivable A/c Dr. 1,800
To Mohan Traders A/c 1,800
(Promissory note established from Mohan Traders)
2016
28 Dec Dream Soaps A/c Dr. 1,900
To Bills Receivable A/c 1,800
To Discount Received A/c 100
(Promissory note of ₹ 1,800 sent to DreamSoap in full settlement of amount due to him)
2016
31 Dec Mohan Traders Dr. 4,500
To Sales A/c 4,500
(Goods traded to Mohan trades list price ₹5,000 at 10% trade discount)
2016
31 Dec Bills Receivable A/c Dr. 4,500
To Mohan Traders 4,500
(Promissory note established from Mohan Traders for 30 days)
2017
23 Jan Cash A/c Dr. 900
To Bills Receivable A/c 900
(Promissory note issued on Dec. 21,2005 was met on maturity)
2017
25 Jan Bill Sent for collection A/c Dr. 4,500
To Bills Receivable A/c 4,500
(Promissory note issued on Dec. 31, 2005sent for collection to bank)
2017
02 Feb Bank A/c Dr. 4,500
To Bill Sent for Collection A/c 4,500
(Bank got payment of bill sent for collectionon due date)
In the books of Bansal TradersMohan Trader’s Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
2016 2016
21 Dec Sales 900 21 Dec Bills Receivable 900
26 Dec Sales 1,080 26 Dec Bills Receivable 1,080
28 Dec Sales 1,800 28 Dec Bills Receivable 1,800
31 Dec Sales 4,500 31 Dec Bills Receivable 4,500
8,280 8,280
Journal Entries in the Books of Mohan Trader’s
Date Particulars L.F. Debit ₹ Credit₹
2016
21 Dec Purchases A/c Dr. 900
To Bansal Traders 900
(Goods purchased from Bansal Trader’s list price ₹1,000 at 10% trade discount)
2016
21 Dec Bansal Trader Dr. 900
To Bills Payable A/c 900
(Promissory note issued Bansal Traders for ₹ 900)
2016
26 Dec Purchases A/c Dr. 1,080
To Bansal Traders 1,080
(Goods purchased from Bansal Traders list price ₹1,200 at 10% Trade discount)
2016
26 Dec Bansal Traders Dr. 1,080
To Bills Payable A/c 1,080
(Promissory note established from Bansal Traders)
2016
28 Dec Purchases A/c Dr. 1,800
To Bansal Traders 1,800
(Goods purchased from Bansal Traders list price ₹2,000 at 10% trade discount)
2016
28 Dec Bansal Traders Dr. 1,800
To Bills Payable A/c 1,800
(Promissory note issued to Bansal Traders)
2016
31 Dec Purchases A/c Dr. 4,500
To Bansal Traders 4,500
(Goods purchased from Bansal Traders of list price ₹5,000 at 10% trade discount)
2016
31 Dec Bansal Traders Dr. 4,500
To Bills Payable A/c 4,500
(Promissory note issued to Bansal Traders)
2017
23 Jan Bills Payable A/c Dr. 900
To Cash A/c 900
(The first promissory note discharged on its due date)
2017
28 Jan Bills Payable A/c Dr. 1,080
To Bank A/c 1,080
(The second promissory note discharged on its duedate)
2017
30 Jan Bills Payable A/c Dr. 1,800
To Cash A/c 1,800
(The third promissory discharged by paying ₹1,800 to Dream Soaps)
2017
02 Feb Bills Payable A/c Dr. 4,500
To Bank A/c 4,500
(The fourth promissory note discharged by paid ₹ 4,500 to Bank)
In the books of Mohan TradersBansal Trader’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2016 2016
21 Dec Bills Payable 900 21 Dec Purchases 900
26 Dec Bills Payable 1,080 26 Dec Purchases 1,080
28 Dec Bills Payable 1,800 28 Dec Purchases 1,800
31 Dec Bills Payable 4,500 31 Dec Purchases 4,500
8,280 8,280

9. Narayanan purchased goods for ₹ 25,000 from Ravindran on Feb. 01, 2016. Ravindran drew upon Narayanan a bill of exchange for the same amount payable after 30 days. On the due date Narayanan dishonoured his acceptance. Pass the necessary journal entries in the books of Ravindran and Narayanan in following cases:

  • When the bill was retained by Ravindran with him till the date of its maturity.
  • When the bill was discounted by Ravindran immediately with his bank @ 6% p.a.
  • When the bill was endorsed to his creditor Ganeshan.
  • When the bill was sent by Ravindran to his bank for collection a few days before it maturity.

Necessary journal entries are as follows:

(i) : When the bill was retained by Ravindran with him till the date of its maturity

Books of Ravindran
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Narayanan Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Narayanan)
01 Feb Bills Receivable A/c Dr. 25,000
To Narayanan 25,000
(Narayanan’s acceptance received for 30 days)
05 Mar Narayanan Dr. 25,000
To Bills Receivable A/c 25,000
(Narayanan failed to meet hisacceptance and bill dishonoured)
Books of Narayanan
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Purchases A/c Dr. 25,000
To Ravindran 25,000
(Goods purchased from Ravindran)
01 Feb Ravindran Dr. 25,000
To Bills Payable A/c 25,000
(Ravindran’s bill accepted)
05 Mar Bills Payable A/c Dr. 25,000
To Ravindran A/c 25,000
(Bill dishonoured on maturity)

(ii) : When the bill was discounted by Ravindran immediately with his bank @ 6% p.a.

Books of Ravindran
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Narayanan Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Narayanan)
01 Feb Bills Receivable A/c Dr. 25,000
To Narayanan 25,000
(Narayanan’s acceptance received)
01 Feb Bank A/c Dr. 24,875
Discount A/c Dr. 125
To Bills Receivable A/c 25,000
(Narayanan’s acceptance got discounted withbank @ 6% p.a.)
05 Mar Narayanan 25,000
To Bank A/c 25,000
(Narayanan’s acceptance dishonoured)
Books of Narayanan
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Purchases A/c Dr. 25,000
To Ravindran 25,000
(Goods purchased from Raivnderan)
01 Feb Ravindran Dr. 25,000
To Bills Payable A/c 25,000
(Ravindran’s bill accepted)
05 Mar Bills Payable A/c Dr. 25,000
To Ravindran 25,000
(Bill dishonoured on maturity)

(iii) : When the bill was endorsed to his creditor Ganeshan

Books of Ravindran
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Narayanan Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Narayanan)
01 Feb Bills Receivable A/c Dr. 25,000
To Narayanan 25,000
(Narayanan’s acceptance received)
01 Feb Ganeshan Dr. 25,000
To Bills Receivable A/c 25,000
(Narayanan’s acceptance endorsed in favourof Ganeshan)
05 Mar Narayanan Dr.
To Ganeshan A/c 25,000
(Narayanan’s acceptance dishonoured)
Books of Narayanan
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Purchases A/c Dr. 25,000
To Ravindran 25,000
(Goods purchased from Ravindran)
01 Feb Ravindran Dr. 25,000
To Bills Payable A/c 25,000
(Ravindran’s bill accepted)
05 Mar Bills Payable A/c Dr. 25,000
To Ravindran 25,000
(Ravindran’s bill dishonoured on due date)

(iv): When the bill was sent by Ravindran to his bank for collection a few days before it maturity

Books of Ravindran
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Narayanan Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Narayanan)
01 Feb Bills Receivable A/c Dr. 25,000
To Narayanan 25,000
(Narayanan’s acceptance received)
01 Feb Bill Sent for Collection A/c Dr. 25,000
To Bills Receivable A/c 25,000
(Bill sent to bank for collection)
05 Mar Narayanan Dr. 25,000
To Bill Sent for Collection A/c 25,000
(Bill got dishonoured)
Books of Narayanan
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Feb Purchases A/c Dr. 25,000
To Ravindran 25,000
(Bought goods from Ravindran)
01 Feb Ravindran Dr. 25,000
To Bills Payable A/c 25,000
(Ravindran’s bill accepted)
05 Mar Bills Payable A/c Dr. 25,000
To Ravindran 25,000
(Ravindran’s bill dishonoured)

10. Ravi sold goods for ₹ 40,000 to Sudershan on Feb 13, 2016. He drew four bills of exchange upon Sudershan. The first bill was for ₹ 5,000 payable after one month. The second bill was for ₹ 10,000 payable after 40 days; the third bill was for ₹ 12,000 payable after three months and fourth bill was for the balance amount payable after 19 days. Sudershan accepted all the bills and returned the same to Ravi. Ravi discounted the first bill with his bank at 6% p.a. He endorsed the second bill to his creditor Mustaq for the full settlement of a debt of ₹ 10,200. The third bill was kept by Ravi with him till the date of maturity. Five days before the maturity of the fourth bill, Ravi sent the bill to his bank for collection. All the four bills were dishounoured by Sudarshan on maturity. Sudershan settled Ravi’s claim in cash three days after the dishonour of each bill along with interest @ 12% p.a. for the terms of the bills. You are requested to record the necessary journal entries in the books to Ravi, Sudershan, Mustaq and bank for the above transaction. Also prepare Sudershan’s account and Mustaq’s account in the books of Ravi.

The necessary journal entries are shown below:

Books of Ravi
Journal
Date Particulars L.F. Debit Credit₹
2016
13 Feb Sudershan Dr. 40,000
To Sales A/c 40,000
(Goods tradedto Sudershan)
13 Feb Bills Receivable A/c Dr. 40,000
To Sudershan 40,000
(Four bills from Sudershan received: the first for ₹5,000, the second bill for ₹ 10,000, the third bill for

₹ 12,000 and the fourth bill for ₹ 13)

13 Feb Bank A/c Dr. 4,975
Discount A/c Dr. 25
To Bills Receivable A/c 5,000
(The first bill discounted with bank at 6% p.a.)
13 Feb Mustaq Dr. 10,200
To Bills Receivable A/c 10,000
To Discount Received A/c 200
(The second bill endorsed to Mustaq in full settlementof amount due to him)
03 Mar Bill Sent for Collection A/c Dr. 13,000
To Bills Receivable A/c 13,000
(The fourth bill sent to bank for collection)
07 Mar Sudershan Dr. 13,000
To Bill Sent for Collection A/c 13,000
(The fourth bill dishonoured on due date)
07 Mar Sudershan Dr. 81
To Interest A/c 81
(Interest due on the fourth bill ₹ 13,000 for 19days at 12% p.a,)
10 Mar Cash A/c Dr. 13,081
To Sudershan 13,081
(Cash received from Sudershan)
16 Mar Sudershan Dr. 5,000
To Bank A/c 5,000
(The first bill dishonoured)
16 Mar Sudershan Dr. 50
To Interest A/c 50
(Interest due on amount ₹ 5,000 at 12%for one month)
19 Mar Cash A/c Dr. 5,050
To Sudershan A/c 5,050
(Sudershan paid the amount due on accountdishonoured of the first bill plus interest)
28 Mar Sudershan Dr. 10,000
Discount Received A/c Dr. 200
To Mustaq 10,200
(The second bill dishonoured, which had endorsedin favour of Mustaq)
28 Mar Sudershan Dr. 132
To Interest A/c 132
(Interest charged at 12% on the amount due on accountof dishonour of the second bill ₹ 10,000)
01 Apr Cash A/c Dr. 10,132
To Sudershan A/c 10,132
(Received cash from Sudershan for the second billalong with interest)
May16 Sudershan Dr. 12,000
To Bills Receivable A/c 12,000
(The third bill dishonoured on due date)
May16 Sudershan Dr. 360
To Interest A/c 360
(Interest at 12% for 3 months charged on the amount dueon account of dishonour the third bill ₹ 12,000)
May19 Cash A/c Dr. 12,360
To Sudershan 12,360
(Cash received from Sudershan for the third bill along with interest 12% p.a.)
LedgerSudershan’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2016 2016
13 Feb Sales 40,000 13 Feb Bills Receivable 40,000
07 Mar Bill sent for Collection 13,000 10 Mar Cash 13,081
07 Mar Interest 81 19 Mar Cash 5,050
16 Mar Bank 5,000 01 Apr Cash 10,132
16 Mar Interest 50 May19 Cash 12,360
28 Mar Mustaq 10,000
28 Mar Interest 132
16 May Bills Receivable 12,000
16 May Interest 360
80,623 80,623
Mustaq’s Account
Dr. Cr.
Date Particulars J.F. Amount  Date Particulars J.F. Amount 
2016 2016
13 Feb B/R 10,000 28 Mar Sudershan 10,000
13 Feb Discount Received 200 28 Mar Discount Received 200
10,200 10,200
Books of Sudershan
Journal
Date Particulars L.F. Debit ₹ Credit₹
2016
13 Feb Purchases A/c Dr. 40,000
To Ravi 40,000
(Goods purchased from Ravi)
13 Feb Ravi Dr. 40,000
To Bills Payable A/c 40,000
(Four bills drawn by Ravi accepted: the first bill for₹ 5,000 payable after one month, the second for

₹ 10,000 payable after 40 days, the third for ₹ 12,000

payable after 3 months and the fourth for ₹ 13,000

payable after 19 days)

07 Mar Bills Payable A/c Dr. 13,000
To Ravi 13,000
(The fourth bill dishonoured)
07 Mar Interest A/c Dr. 81
To Ravi 81
(Interest charged for the amount of fourth billat 12% p.a.)
10 Mar Ravi Dr. 13,081
To Cash A/c 13,081
(Cash paid to Ravi for amount due on account ofdishonour of the fourth bill along with interest

at 12% p.a. for 19 days)

16 Mar Bills Payable A/c Dr. 5,000
To Ravi 5,000
(The first bill dishonoured)
16 Mar Interest A/c Dr. 50
To Ravi 50
(Interest charged at 12% p.a. on the first bill for one month)
19 Mar Ravi Dr. 5,050
To Cash A/c 5,050
(Cash paid to Ravi for amount due on account ofdishonour of the first bill along with interest

at 12% p.a. for one month)

28 Mar Bills Payable A/c Dr. 10,000
To Ravi 10,000
(The second bill dishonoured)
28 Mar Interest A/c Dr. 132
To Ravi 132
(Interest charged at 12% p.a. for 40 days on the second bill)
01 Apr Ravi Dr. 10,132
To Cash A/c 10,132
(Cash paid to Ravi for amount due on account ofdishonour of the second bill along with interest

at 12% p.a. for 40 days)

16 May Bills Payable A/c Dr. 12,000
To Ravi 12,000
(The third bill dishonoured)
16 Mar Interest A/c Dr. 360
To Ravi 360
(Interest charged at 12% p.a. for 3 months on third bill)
19 May Ravi Dr. 12,360
To Cash A/c 12,360
(Cash paid to Ravi for amount due on account ofdishonour of the third bill along with interest

at 12% p.a. for 3 months)

11. On Jan 01, 2016 Neha sold goods for ₹ 20,000 to Muskan and drew upon her a bill of exchange payable after two months. One month before the maturity of the bill Muskan approached Neha to accept the payment against the bill at a rebate @ 12% p.a. Neha agreed to the request of Muskan and Muskan retired the bill under the agreed rate of rebate. Journalise the above transaction in the books of Neha and Muskan.

The necessary journal entries are shown below:

Books of NehaJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Jan Muskan Dr. 20,000
To Sales A/c 20,000
(Goods tradedto Muskan)
01 Jan Bills Receivable A/c Dr. 20,000
To Muskan 20,000
(Muskan’s acceptance received)
04 Feb Cash A/c Dr. 19,800
Rebate on bill A/c Dr. 200
To Bills Receivable A/c 20,000
(Muskan’s acceptance retired one month beforematurity and allowed rebate at 12% p.a.)

  

Books of MuskanJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
01 Jan Purchases A/c Dr. 20,000
To Neha 20,000
(Goods purchased from Neha)
01 Jan Neha Dr. 20,000
To Bills Payable A/c 20,000
(Bill drawn by Neha payable after 2 monthsaccepted)
04 Feb Bills Payable A/c Dr. 20,000
To Cash A/c 19,800
To Rebate on Bills A/c 200
(Bill paid one month before maturity and receivedRebate at 12% p.a.)

12. On Jan 15, 2016 Raghu sold goods worth ₹ 35,000 to Devendra and drew up to the latter three bills of exchanges. The first bill was for ₹ 5,000 payable after one month, the second bill was for ₹ 20,000 payable after three months and third bill for balance amount for 4 months. Raghu endorsed the first bill in favour of his creditor Dewan in full settlement of a debt of ₹ 5,200. The second bill was discounted by Raghu @ 6 % p.a. and the third bill was retained by Raghu till the date of maturity. Devendra dishonoured the bill on maturity and the bank paid ₹ 30 as noting charges. Four days before the maturity of the third bill Raghu, sent the same for collection to his bank. The third bill was also dishonoured by Devendra and the bank paid ₹ 200 as noting charges. Five days after the dishonour of the bill Devendra paid the entire amount due to Raghu along with interest ₹ 1,000 for this purpose Devendra obtained a short term loan from his bank. You are requested to record the necessary journal entries in the books of Raghu Devendra and Dewan and also prepare Devendra’s account in Raghu’s books and Raghu’s account in Devendra’s account.

The journal entries are as follows:

Books of RaghuJournal
Date   Particulars   L.F. Debit ₹ Credit₹
2016
15 Jan Devendra Dr. 35,000
To Sales A/c 35,000
(Goods tradedto Devendra)
15 Jan Bills Receivable A/c Dr. 35,000
To Devendra 35,000
(Three bills received from Devendra–the first bill ₹ 5,000,the second bill ₹ 20,000, the third bill ₹ 10,000)
15 Jan Dewan Dr. 5,200
To Bills Receivable A/c 5,000
To Discount Received A/c 200
(The first bill endorsed to Dewan in full settlementof amount due to him)
15 Jan Bank A/c Dr. 19,700
Discount A/c Dr. 300
To Bills Receivable A/c 20,000
(The second bill discounted with bank at 6% p.a.)
18 Apr Devendra Dr. 20,030
To Bank A/c 20,030
(The second bill dishonoured and bank paid₹ 30 for noting charges)
14 May Bill Sent for Collection A/c Dr. 10,000
To Bills Receivable A/c 10,000
(The third bill sent to bank for collection)
18 May Devendra Dr. 10,200
To Bill sent for collection A/c 10,000
To Bank A/c 200
(The third bill dishonoured and bank paid ₹ 200as noting charges)
23 May Devendra Dr. 1,000
To Interest A/c 1,000
(Interest due to Devendra on account of billsdishonoured)
23 May Cash A/c Dr. 31,230
To Devendra 31,230
(Cash received from Devendra)
Ledger Devendra’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2016 2016
15 Jan Sales 35,000 15 Jan Bills Receivable 35,000
18 Apr Bank 20,030 23 May Cash 31,230
18 May Bills Sent for Collection 10,000
18 May Bank 200
23 May Interest 1,000
66,230 66,230
Books of DevendraJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Purchases A/c Dr. 35,000
To Raghu 35,000
(Goods purchased from Raghu)
15 Jan Raghu Dr. 35,000
To Bills Payable A/c 35,000
(Three bills drawn by Raghu accepted: the first bill for₹ 5,000 payable after one month, the second for ₹ 20,000

payable after 3 months and the third for ₹ 10,000

payable after 4 months)

18 Feb Bills Payable A/c Dr. 5,000
To Cash 5,000
(The first bill discharged on the due date)
18 Apr Bills Payable A/c Dr. 20,000
Noting Charges A/c Dr. 30
To Raghu 20,030
(The second bill dishonoured and Noting Charges₹ 30)
18 May Bills Payable A/c Dr. 10,000
Noting Charges A/c Dr. 200
To Raghu 10,200
(The third bill dishonoured and Noting Charges ₹ 200)
23 May Interest A/c Dr. 1,000
To Raghu 1,000
(Interest charged ₹ 1,000 on account ofbills dishonoured)
23 May Cash A/c Dr. 31,230
To Bank Loan A/c 31,230
(Bank loan taken for settling Raghu’s account)
23 May Raghu Dr. 31,230
To Cash A/c 31,230
(Cash paid to Raghu)
LedgerRaghu’s Account
Dr. Cr.
Date Particulars J.F. Amount  Date Particulars J.F. Amount 
2016 2016
15 Jan Bills Payable 35,000 15 Jan Purchases 35,000
23 May Cash 31,230 18 Apr Bills Payable 20,000
18 Apr Noting Charges 30
18 May Bills Payable 10,000
18 May Noting Charges 200
18 May Interest 1,000
66,230 66,230
Books of DewanJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Bills Receivable A/c Dr. 5,000
Discount Allowed A/c Dr. 200
To Raghu  5,200
(Bill Receivable received from Raghu for one month andallowed him discount of ₹ 200)
18 Feb Cash A/c Dr. 5,000
To Bills Receivable A/c 5,000
(Bill met on maturity)

13. Vimal purchased goods ₹ 25,000 from Kamal on Jan 15, 2016 and accepted a bill of exchange drawn upon him by Kamal payable after two months. On the date of the maturity the bill was duly presented for payment. Vimal dishonoured the bill. Record the necessary journal entries in the books of Kamal and Vimal when.

•    The bill was retained by Kamal till the date of its maturity.

•    The bill was immediately discounted by Kamal with his bank @ 6% p.a.

•    The bill was endorsed by Kamal in favour of his creditor Sharad.

•    Five days before its maturity the bill was sent by Kamal to his bank for collection.

The necessary journal entries are shown below:

(i) : The bill was retained by Kamal till the date of its maturity

Books of KamalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Vimal Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Vimal)
15 Jan Bills Receivable A/c Dr. 25,000
To Vimal 25,000
(Vimal’s acceptance received)
18 Mar Vimal Dr. 25,000
To Bills Receivable A/c 25,000
(Vimal acceptance dishonoured)
Books of VimalJournal
Date Particulars L.F. DebitAmount

CreditAmount

2016
15 Jan Purchases A/c Dr. 25,000
To Kamal 25,000
(Goods purchased from Kamal)
15 Jan Kamal Dr. 25,000
To Bills Payable A/c 25,000
(Bill drawn by Kamal accepted)
18 Mar Bills Payable A/c Dr. 25,000
To Kamal 25,000
(Bill drawn by Kamal dishonoured)

(ii) : The bill was immediately discounted by Kamal with his bank @ 6% p.a.

Books of KamalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Vimal Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Vimal)
15 Jan Bills Receivable A/c Dr. 25,000
To Vimal 25,000
(Vimal’s acceptance received)
15 Jan Bank A/c Dr. 24,750
Discount A/c Dr. 250
To Bills Receivable A/c 25,000
(Vimal’s acceptance discounted at 6% p.a. withbank)
18 Mar Vimal Dr. 25,000
To Bank A/c 25,000
(Vimal’s acceptance dishonoured)
Books of VimalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Purchases A/c Dr. 25,000
To Kamal 25,000
(Goods purchased from Kamal)
15 Jan Kamal Dr. 25,000
To Bills Payable A/c 25,000
(Bill drawn by Kamal accepted)
18 Mar Bills Payable A/c Dr. 25,000
To Kamal 25,000
(Bill drawn by Kamal dishonoured)

Case (iii) : The bill was endorsed by Kamal in favour of his creditor Sharad

Books of KamalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Vimal Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Vimal)
15 Jan Bills Receivable A/c Dr. 25,000
To Vimal 25,000
(Vimal’s acceptance received)
15 Jan Sharad Dr. 25,000
To Bills Receivable A/c 25,000
(Vimal’s acceptance endorsed to Sharad)
18 Mar Vimal Dr. 25,000
To Sharad 25,000
(Vimal’s acceptance endorsed to Kamal dishonoured)
Books of VimalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Purchases A/c Dr. 25,000
To Kamal 25,000
(Goods purchased from Kamal)
15 Jan Kamal Dr. 25,000
To Bills Payable A/c 25,000
(Bill drawn by Kamal accepted)
18 Mar Bills Payable A/c Dr. 25,000
To Kamal 25,000
(Bill drawn by Kamal dishonoured)

Case (IV): Five days before its maturity the bill was sent by Kamal to his bank for collection

Books of KamalJournal
Date Particulars L.F. Debit ₹ Credit₹
2016
15 Jan Vimal Dr. 25,000
To Sales A/c 25,000
(Goods tradedto Vimal)
15 Jan Bills Receivable A/c Dr. 25,000
To Vimal 25,000
(Vimal’s acceptance received, payable after two months)
Mar.13 Bill Sent for Collection A/c Dr. 25,000
To Bills Receivable A/c 25,000
(Vimal’s acceptance sent to bank for collection)
18 Mar Vimal Dr. 25,000
To Bill Sent for Collection 25,000
(Vimal’s acceptance dishonoured)
Books of VimalJournal
Date Particulars L.F. Debit ₹ Credit₹
Case (iii)
2016
15 Jan Purchases A/c Dr. 25,000
To Kamal 25,000
(Goods purchased from Kamal)
15 Jan Kamal Dr. 25,000
To Bills Payable A/c 25,000
(Bill drawn by Kamal accepted)
18 Mar Bills Payable A/c Dr. 25,000
To Kamal 25,000
(Bill drawn by Kamal dishonoured)

14. Abdula sold goods to Tahir on Jan 17, 2017 for ₹ 18,000. He drew a bill of exchange for the same amount on Tahir for 45 days. On the same date Tahir accepted the bill and returned it to Abdulla. On the due date Abdulla presented the bill to Tahir which was dishonoured. Abdulla paid ₹ 40 as noting charges. Five days after the dishonour of his acceptance Tahir settled his debt by making a payment of ₹ 18,700 including interest and noting charges. Record the necessary journal entries in the books of Abdulla and Tahir. Also prepare Tahir’s account in the books of Abdulla and Abdulla’s account in the books of Tahir.

The necessary journal entries are shown below:

Books of AbdulaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
17 Jan Tahir Dr. 18,000
To Sales A/c 18,000
(Goods tradedto Tahir)
17 Jan Bills Receivable A/c Dr. 18,000
To Tahir 18,000
(Tahir’s acceptance received)
06 Mar Tahir Dr. 18,040
To Bills Receivable A/c 18,000
To Cash 40
(Tahir’s acceptance dishonoured and ₹ 40 paid asnoting charges)
06 Mar Tahir Dr. 660
To Interest A/c 660
(Interest charged from Tahir on account of billdishonoured)
12 Mar Cash A/c Dr. 18,700
To Tahir 18,700
(Tahir cleared his account by paying cash)
Ledger Tahir’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
17 Jan Sales 18,000 17 Jan Bills Receivable 18,000
06 Mar Bills Receivable 18,000 11 Mar Cash 18,700
06 Mar Cash 40
06 Mar Interest 660
36,700 36,700
Books of TahirJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
17 Jan Purchases A/c Dr. 18,000
To Abdula 18,000
(Goods purchased from Abdula)
17 Jan Abdula Dr. 18,000
To Bills Payable A/c 18,000
(Bill drawn by Abdula accepted, payable after 15 days)
06 Mar Bills Payable A/c Dr. 18,000
Noting Charges A/c Dr. 40
To Abdula 18,040
(Abula’s bill dishonoured)
07 Mar Interest A/c Dr. 660
To Abdula 660
(Interest charged on account of bill dishonoured)
11 Mar Abdula Dr. 18,700
To Cash A/c 18,700
(Cash paid to Abdula)
LedgerAbdula’sAccount
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
17 Jan Bills Payable 18,000 17 Jan Purchases 18,000
11 Mar Cash 18,700 06 Mar Bills Payable 18,000
06 Mar Noting Charges 40
06 Mar Interest 660
36,700 36,700

15. Asha sold goods worth ₹ 19,000 to Nisha on March 02, 2017. ₹ 4,000 were paid by Nisha immediately and for the balance she accepted a bill of exchange drawn upon her by Asha payable after three months. Asha discounted the bill immediately with her bank. On the due date Nisha dishonoured the bill and the bank paid ₹ 30 as noting charges.

Record the necessary journal entries in the books of Asha and Nisha.

The necessary journal entries are presented below

Books of AshaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
02 Mar Nisha Dr. 19,000
To Sales A/c 19,000
(Goods tradedto Nisha)
02 Mar Cash A/c Dr. 4,000
Bills Receivable A/c Dr. 15,000
To Nisha 19,000
(Cash and Nisha’s acceptance received)
02 Mar Bank A/c Dr. 14,635
Discount A/c Dr. 375
To Bills Receivable A/c 15,000
(Nisha’s acceptance discounted with bank at 10% p.a.)
Note: In this question rate of discount is not given, the rate of discount (10% p.a.) has been

 assumed).

05 Jun Nisha Dr. 15,030
To Bank A/c 15,030
(Nisha’s acceptance dishonoured and bankpaid ₹ 30 as noting charges)
Books of NishaJournal
Date Particulars L.F. Debit  Credit₹
2017
02 Mar Purchases A/c Dr. 19,000
To Asha 19,000
(Goods purchased from Asha)
02 Mar Asha Dr. 19,000
To Bills Payable A/c 15,000
To Cash A/c 4,000
(Asha’s bill accepted payable after three month and₹ 4,000 paid in cash)
Jun.05 Bills Payable A/c Dr. 15,000
Noting Charges A/c Dr. 30
To Asha 15,030
(Asha’s bill dishonoured)

16. On Feb. 02, 2017, Verma purchased from Sharma goods for ₹ 17,500. Verma paid ₹ 2,500 immediately and for the balance gave a promissory note to Sharma payable after 60 days. Sharma immediately endorsed the promissory note in favour of his creditor.

Gupta for the full settlement of a debt of ₹ 15,400. On the due date of the bill Gupta presented the bill to Verma which the latter dishonoured and Gupta paid ₹ 5,000 noting charges. On the same date Gupta informed Sharma about the dishonour of the bill. Sharma settled his debt to Gupta by cheque for ₹ 15,500 which includes noting charges and interest. Verma settled Sharma’s claim by cheque for the same amount.

Record the necessary journal entries is the books of Sharma, Gupta and Verma for the above transaction and prepare Verma’s and Gupta’s accounts in the books of Sharma. Sharma’s account in the books of Verma. And also Sharma’s account in the books of Gupta.

The necessary journal entries are given below:

Books of SharmaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
02 Feb Verma Dr. 17,500
To Sales A/c 17,500
(Goods tradedto Verma)
02 Feb Cash A/c Dr. 2,500
Bills Receivable A/c Dr. 15,000
To Verma 17,500
(Cash ₹ 2,500 and Promissory Note ₹ 15,000 receivedfrom Verma for 60 days)
02 Feb Gupta A/c Dr. 15,400
To Bills Receivable A/c 15,000
To Discount Received A/c 400
(Promissory Note endorsed to Gupta in full settlementof amount due to him)
05 Apr Discount Received A/c Dr. 400
Verma Dr. 15,050
To Gupta 15,450
(Promissory Note issued by Verma dishonouredand Gupta paid ₹ 50 as noting charges)
Note: In this question ₹ 5,000 is given as noting charges,there is mistake. Here ₹ 50 has been taken as noting

charges instead of ₹ 5,000).

06 Apr Interest A/c Dr. 50
To Gupta 50
(Interest of ₹ 50 debited to Gupta, on account ofdishonour of Promissory Note)
06 Apr Gupta Dr. 15,500
To Bank A/c 15,500
(Gupta’s A/c settled)
06 Apr Bank A/c Dr. 15,050
To Verma 15,050
(Cheque received from Verma for the amount due from him)
LedgerVerma’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
02 Feb Sales 17,500 02 Feb Cash 2,500
06 Apr Gupta 15,050 02 Feb Bills Receivable 15,000
06 Apr Bank 15,050
32,550 32,550
Gupta’s Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
2017 2017
02 Feb B/R 15,000 01 Apr Balance b/d 15,400
02 Feb Discount Received 400 06 Apr Verma 15,050
02 Feb Bank 15,500 06 Apr Discount Reserved 400
06 Apr Interest 50
30,900 30,900
Books of VermaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
02 Feb Purchases A/c Dr. 17,500
To Sharma 17,500
(Goods purchased from Sharma)
02 Feb Sharma Dr. 17,500
To Bills Payable A/c 15,000
To Cash A/c 2,500
(Cash ₹ 2,500 paid and Promissory Note made forthe balance)
06 Apr Bills Payable A/c Dr. 15,000
Noting Charges A/c Dr. 50
To Sharma 15,050
(Promissory Note dishonoured on maturity)
06 Apr Sharma Dr. 15,050
To Bank A/c 15,050
(Payment made to Sharma through cheque)
Ledger Sharma’s Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
2017 2017
02 Feb Cash 2,500 02 Feb Purchases 17,500
02 Feb Bills Payable 15,000 06 Apr Bills Payable 15,000
06 Apr Bank 50 06 Apr Noting Charges 50
30,900 30,900
Books of GuptaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
02 Feb Bills Receivable A/c Dr. 15,000
Discount Allowed A/c Dr. 400
To Sharma 15,400
(Promissory Note ₹ 15,000 received from Sharma infull settlement for 60 days)
06 Apr Sharma Dr. 15,450
To Bills Receivable A/c 15,000
To Discount Allowed A/c 400
To Bank A/c 50
(Promissory note established from Sharma, dishonoured)
06 Apr Sharma Dr. 50
To Interest A/c 50
(Interest ₹ 50 credited on account of Promissory Notedishonoured)
06 Apr Bank A/c Dr. 15,500
To Sharma 15,500
(Cheque received from Sharma)
Ledger Sharma’s Account
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
2017 2017
01 Feb Balance b/d 15,400 02 Feb Bills Receivable 15,000
06 Apr Bills Receivable 15,000 02 Feb Discount Allowed 400
06 Apr Discount Allowed 4,000 06 Apr Bank 15,500
06 Apr Bank 50
06 Apr Interest 50
30,900 30,900

17. Lilly sold goods to Mathew on 1.3.2017 for ₹ 12,000 and drew upon Mathew a bill of exchange for the same amount payable after two months. Lilly immediately discounted the bill with her bank at 9% p.a. The maturity date of the bill was a non-business day (holiday), therefore, Lilly had to present the bill as per the provisions of the Indian Instruments Act.1881. The bill was dishonoured by Mathew and Lilly paid ₹ 45 as noting charges. Mathew settled the claim of Lilly five days after the dishonour of the bill by a cheque, which includes interest @ 12% for the term of the bill. Journalise the above transactions in the books of Lilly and Mathew and prepare Mathew’s account in the books of Lilly and Lilly’s account in the books of Mathew.

The transactions are journalized as follows:

Books of LillyJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Mar Mathew Dr. 12,000
To Sales A/c 12,000
(Goods tradedto Mathew)
01 Mar Bills Receivable A/c Dr. 12,000
To Mathew 12,000
(Mathew’s acceptance payable after two months received)
01 Mar Bank A/c Dr. 11,820
Discount A/c Dr. 180
To Bills Receivable A/c 12,000
(Mathew’s bill discounted at 9% p.a.)
03 May Mathew A/c Dr. 12,045
To Bank A/c 12,045
(Mathew’s acceptance dishonoured bank paid ₹ 45 asnoting charges)
Note: In this question, May 04 has been considered asHoliday, so the date of maturity will be 03 May, 2017 in

place of May 04, 2017.

08 May Mathew Dr. 241
To Interest A/c 241
(Interest @ 12% credited to Mathew on account of bill dishonoured)
08 May Bank A/c Dr. 12,286
To Mathew 12,286
(Cheque received from Mathew for the amount due from him)
LedgerMathew’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
01 Mar Sales 12,000 01 Mar Bills Receivable 12,000
03 May Bank 12,045 08 May Bank 12,286
08 May Interest 241
24,286 24,286
Books of MathewJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Mar Purchases A/c Dr. 12,000
To Lilly 12,000
(Goods purchased from Lilly)
01 Mar Lilly Dr. 12,000
To Bills Payable A/c 12,000
(Lilly’s acceptance payable after two months accepted)
03 May Bills Payable A/c Dr. 12,000
Noting Charges A/c Dr. 45
To Lilly 12,045
(Bill drawn by Lilly dishonoured)
08 May Interest A/c Dr. 241
To Lilly 241
(Interest charged @ 12% from Lilly on account of bill dishonoured)
08 May Lilly Dr. 12,286
To Bank A/c 12,286
(Amount paid to Lilly through cheque)
Ledger Lilly’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
01 Mar Bills Payable 12,000 01 Mar Purchases 12,000
09 May Bank 12,286 03 May Bills Payable 12,000
03 May Noting charges 45
08 May Interest 241
24,286 24,286

18. Kapil purchased goods for ₹ 21,000 from Gaurav on 1.2.2017 and accepted a bill of exchange drawn by Gaurav for the same amount. The bill was payable after one month. On 25.2.2017 Gaurav sent the bill to his bank for collection. The bill was duly presented by the bank. Kapil dishonoured the bill and the bank paid ₹ 100 as noting charges. Record the necessary journal entries for the above transactions in the books of Kapil and Gourav.

The necessary journal entries are shown below:

Books of GauravJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Feb Kapil Dr. 21,000
To Sales A/c 21,000
(Goods tradedto Kapil)
01 Feb Bills Receivable A/c Dr. 21,000
To Kapil 21,000
(Kapil’s acceptance received)
25 Feb Bills Sent for Collection A/c Dr. 21,000
To Bills Receivable A/c 21,000
(Bill Receivable sent to bank for collection)
04 Mar Kapil Dr. 21,100
To Bill Sent for Collection A/c 21,000
To Bank A/c 100
(Kapil’s acceptance dishonoured)
Books of KapilJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Feb Purchases A/c Dr. 21,000
To Gaurav 21,000
(Goods purchased from Gaurav)
01 Feb Gaurav Dr. 21,000
To Bills Payable A/c 21,000
(Bill drawn by Gaurav payable after one monthaccepted)
04 Mar Bills Payable A/c Dr. 21,000
Noting Charges A/c Dr. 100
To Gaurav 21,100
(Bill drawn by Kapil dishonoured)

19. On Feb. 14, 2017 Rashmi sold good ₹ 7,500 to Alka. Alka paid ₹ 500 in cash and for the bank balance accepted a bill of exchange drawn upon her by Rashmi payable after two months. On 10 Apr, 2017 Alka approached Rashmi to cancel the bill since she was short of funds. She further requested Rashmi to accept ₹ 2,000 in cash and draw a new bill for the balance including interest ₹ 500. Rashmi accepted Alka’s request and drew a new bill for the amount due payable after 2 months. The bill was accepted by Alka. The new bill was duly met by Alka on maturity.

Record the necessary journal entries in the books of Rashmi and Alka and prepared Alka’s account in the books of Rashmi’s and Rashmi’s account in the books of Alka’s.

The necessary journal entries are recorded below:

Books of RashmiJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
14 Feb Alka Dr. 7,500
To Sales A/c 7,500
(Goods tradedto Alka)
14 Feb Cash A/c Dr. 500
Bills Receivable A/c Dr. 7,000
To Alka 7,500
(Cash received ₹ 500 and the bill accepted by Alka)
10 Apr Alka Dr. 7,000
To Bills Receivable A/c 7,000
(Alka got the bill cancelled)
10 Apr Cash A/c Dr. 2,000
 To Alka 2,000
(Received cash from Alka)
10 Apr Alka Dr. 500
To Interest A/c 500
(Interest charged on the amount due from Alka)
10 Apr Bills Receivable A/c Dr. 5,500
To Alka 5,500
(Alka’s acceptance payable of two months received)
13 June Cash A/c Dr. 5,500
To Bills Receivable A/c 5,500
(Alka’s acceptance met on due date)
Ledger Alka’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
14 Feb Sales 7,500 14 Feb Cash 500
10 Apr Bills Receivable 7,000 14 Feb Bills Receivable 7,000
10 Apr Interest 500 10 Apr Cash 2,000
10 Apr Bills Receivable 5,500
15,000 15,000
Books of AlkaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
14 Feb Purchases A/c Dr. 7,500
To Rashmi 7,500
(Goods purchased from Rahsmi)
14 Feb Rashmi Dr. 7,500
To Cash A/c 500
To Bills Payable A/c 7,000
(Cash paid to Rashmi ₹ 500 and a bill for ₹ 7,000drawn by Rashmi accepted)
10 Apr Bills Payable A/c Dr. 7,000
To Rashmi 7,000
(Bill cancelled before maturity)
10 Apr Rashmi Dr. 2,000
To Cash A/c 2,000
(Cash paid to Rashmi)
10 Apr Interest A/c Dr. 500
To Rashmi 500
(Interest due to Rashmi)
10 Apr Rashmi Dr. 5,500
To Bills Payable A/c 5,500
(Rashmi’s acceptance payable after two monthsaccepted)
13 June Bills Payable A/c Dr. 5,500
To Cash A/c 5,500
(The bill met on due date)
LedgerRashmi’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
14 Feb Cash 500 14 Feb Purchases 7,500
14 Feb Bills Payable 7,000 10 Apr Bills Payable 7,000
10 Apr Cash 2,000 10 Apr Interest 500
10 Apr Bills Payable 5,500
15,000 15,000

20. Nikhil sold goods for ₹ 23,000 to Akhil on Dec. 01, 2017. He drew upon Akhil a bill of exchange for the same amount payable after 2 months. Akhil accepted the bill and sent it back to Nikhil. Nikhil discounted the bill immediately with his bank @12 p.a. On the due date Akhil dishonoured the bill of exchange and the bank paid ₹ 100 as noting charges. Akhil requested Nikhil to draw a new bill upon him with interest @10% p.a. which he agreed. The new bill was payable after two months. A week before the maturity of the second bill Akhil requested Nikhil to cancel the second bill. He further requested to accept ₹ 10,000 in cash immediately and drew a third bill upon him including interest of ₹ 500. Nikhil agreed to Akhil’s request. The third bill was payable after one month. Akhil met the third bill on its maturity. Record the necessary journal entries in the books of Nikhil and Akhil and also prepare Akhil’s account in the books of Nikhil and Nikhil’s account in the books of Akhil.

The necessary journal entries are recorded as follows:

Books of NikhilJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Dec Akhil Dr. 23,000
To Sales A/c 23,000
(Goods tradedto Akhil)
01 Dec Bills Receivable A/c Dr. 23,000
To Akhil 23,000
(Akhil’s acceptance received)
01 Dec Bank A/c Dr. 22,540
Discount A/c Dr. 460
To Bills Receivable A/c 23,000
(Akhil’s acceptance discounted at 12% p.a with bank)
2018
04 Feb Akhil Dr. 23,100
To Bank A/c 23,100
(Akhil’s acceptance dishonoured, bank paid₹ 100 as noting charges)
04 Feb Akhil Dr. 385
To Interest A/c 385
(Interest credited on account of bill dishonouredat 10% p.a. for two months)
04 Feb Bills Receivable A/c Dr. 23,485
To Akhil 23,485
(New acceptance received from Akhil fornext two months received)
01 Apr Akhil Dr. 23,485
To Bills Receivable A/c 23,485
(The second bill cancelled one week beforematurity)
01 Apr Cash A/c Dr. 10,000
To Akhil 10,000
(Cash received from Akhil)
01 Apr Akhil Dr. 500
To Interest A/c 500
(Interest due from Akhil for the bill)
01 Apr Bills Receivable A/c Dr. 13,985
To Akhil 13,985
(Bill from Akhil received)
May 04 Cash A/c Dr. 13,985
To Bills Receivable A/c 13,985
(The third bill met on due date)
Akhil’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
01 Dec Sales 23,000 01 Dec Bills Receivable 23,000
2018 2018
04 Feb Bank 23,100 04 Feb Bills Receivable 23,485
04 Feb Interest 385 01 Apr Cash 10,000
01 Apr Bills Receivable 23,485 01 Apr Bills Receivable 13,985
01 Apr Interest 500
70,470 70,470
Books of AkhilJournal
Date Particulars L.F. Debit Credit Amount
2017
01 Dec Purchases A/c Dr. 23,000
To Nikhil 23,000
(Goods purchased from Nikhil)
01 Dec Nikhil Dr. 23,000
To Bills Payable A/c 23,000
(Bill drawn by Nikhil payable after two monthsaccepted)
2018
04 Feb Bills Payable A/c Dr. 23,000
Noting Charges A/c Dr. 100
To Nikhil 23,100
(Bill dishonoured on due date and ₹ 100 paid bythe holder of bill)
04 Feb Interest A/c Dr. 385
To Nikhil A/c 385
(Interest due to Nikhil for the bill dishonoured)
04 Feb Nikhil Dr. 23,485
To Bills Payable A/c 23,485
(New bill accepted payable after two months)
01 Apr Bills Payable A/c Dr. 23,485
To Nikhil 23,485
(Bill cancelled before maturity)
01 Apr Nikhil Dr. 10,000
To Cash A/c 10,000
(Cash paid to Nikhil)
01 Apr Interest A/c Dr. 500
To Nikhil 500
(Interest due to Nikhil for bill cancellation)
01 Apr Nikhil Dr. 13,985
To Bills Payable A/c 13,985
(New bill accepted payable after one month)
May 04 Bills Payable A/c Dr. 13,985
To Cash A/c 13,985
(The third bill met on maturity)
Nikhil Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
01 Dec Bills Payable 23,000 01 Dec Purchases 23,000
2018 2018
04 Feb Bills Payable 23,485 04 Feb Bills Payable 23,000
01 Apr Cash 10,000 04 Feb Noting Charge 100
01 Apr Bills Payable 13,985 04 Feb Interest 385
01 Apr Bills Payable 23,485
01 Apr Interest 500
70,470 70,470

21. On Jan 01, 2017 Vibha sold goods worth ₹ 18,000 to Sudha and drew upon the latter a bill of exchange for the same amount payable after two months. Sudha accepted Vibha’s draft and returned the same to Vibha after acceptance. Vibha endorsed the bill immediately in favour of her creditor Geeta. Five days before the maturity of the bill Sudha requested Vibha to cancel the bill since she was short of funds. She further requested to draw a new bill upon her including interest of ₹ 200. Vibha accepted Sudha’s request. Vibha took the bill from Geeta by making the payment to her in cash and cancelled the same. Then she drew a new bill upon Sudha as agreed. The new bill was payable after one month. The new bill was duly met by Sudha on maturity. Record the necessary journal entries in the books of Vibha.

The necessary journal entries are recorded as follows:

Books of VibhaJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Jan Sudha Dr. 18,000
To Sales A/c 18,000
(Goods tradedto Sudha)
01 Jan Bills Receivable A/c Dr. 18,000
To Sudha 18,000
(Sudha’s acceptance received)
01 Jan Geeta Dr. 18,000
To Bills Receivable A/c 18,000
(Sudha’s acceptance endorsed in favour of Geeta)
27 Feb Sudha Dr. 18,000
To Geeta 18,000
(Sudha cancelled the bill five days before the maturity)
27 Feb Geeta Dr. 18,000
To Cash A/c 18,000
(Cash paid to Geeta)
27 Feb Sudha 200
To Interest A/c 200
(Interest credited to Sudha on account ofcancelling the bill )
27 Feb Bills Receivable A/c Dr. 18,200
To Sudha 18,200
(New bill received from Sudha)
02 Mar Cash A/c Dr. 18,200
To Sudha 18,200
(Sudha’s acceptance met on due date)

22. Following was the position of debtor and creditor of Gautam as on 1.1.2017.

Debtors Creditors

₹ ₹

Babu 5,000 –

Chanderkala 8,000 –

Kiran 13,500 –

Anita 14,000 –

Anju – 5,000

Sheiba – 12,000

Manju – 6,000

The following transactions took place in the month of Jan 2017:

Jan. 02 Drew on Babu at two months after date at full settlement for ₹ 4,800. Babu accepted the bill and returned it on 5.1.2017.

Jan. 04 Babu’s bill discounted for ₹ 4,750.

Jan. 08 Chanderkala sent a promissory note for ₹ 8,000 payable three months after date.

Jan. 10 Promissory note established from Chanderkala discounted for ₹ 7,900

Jan. 12 Accepted Sheiba draft for the amount due payable two months after date.

Jan. 22 Anita sent his promissory note payable after two months.

Jan. 23 Anita’s promissory note endorsed in favour of Manju.

Jan. 25 Accepted Anju’s draft payable after three months.

Jan. 29 Kiran sent ₹ 2,000 in cash and a promissory note for the balance payable after three months.

Record the above transactions in the proper subsidiary books.

The transactions are recorded in the books below:

Bills Receivable Book
No. Date of Bill2017 Date Received 2016 From whom of Bill Drawer whom 

received

Acceptor Where Term Payable Due date 2016 L.F. Amount Cash Book 

Folio

Remarks
01 02 Jan 05 Jan Babu Self Babu 2 months 05 Mar 4,800
Total 4,800
Bills Payable Book
No. Date of Bill2017 To WhomGiven Drawer Payee Where payable Term Due date 2017 Ledger Amount Date paid Cash Book 

Folio

Remarks
01 12 Jan Sheiba Sheiba 2 months 15 Mar 12,000
02 25 Jan Anju Anju 2 months 28 Apr 5,000
Total 17,000
Cash Book
Dr. Cr.
Date Particulars L.F. Cash Bank Date Particulars L.F. Cash ₹ Bank 
2017 2017
04 Jan Bills Receivable 4,750
10 Jan Bills Receivable 7,900
29 Jan Kiran 2,000 31 Jan Balance c/d 2,000 12,650
2,000 12,650 2,000 12,650
 Books of GautamJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
05 Jan Discount Allowed A/c Dr. 200
To Babu 200
(Babu’s acceptance received and allowed himdiscount ₹ 200)
04 Jan Discount A/c Dr. 50
To Bills Receivable A/c 50
(Babu’s acceptance discounted with a discountcharge of ₹ 50)
08 Jan Bills Receivable A/c Dr. 8,000
To Chanderkala 8,000
(Promissory Note from Chanderkala received)
10 Jan Discount A/c Dr. 100
To Bills Receivable A/c 100
(Chanderkala’s Promissory Note discounted with bankat discount of ₹ 100)
22 Jan Bills Receivable A/c Dr. 14,000
To Anita 14,000
(Promissory note established from Anita)
23 Jan Manju Dr. 14,000
To Bills Receivable A/c 14,000
(Anita’s Promissory Note endorsed to Manju)
29 Jan Bills Receivable A/c Dr. 11,500
To Kiran 11,500
(Promissory Note from Kiran received)

23. On Jan. 01, 2017 Harsh accepted a month bill for ₹ 10,000 drawn on him by Tanu for latter’s benefit. Tanu discounted the bill on same day @ 8% p.a. On the due date Tanu sent a cheque to Harsh for honour the bill. Harsh duly honoured his acceptance. Record the journal entries in the Books of Tanu and Harsh.

The journal entries recorded are shown below:

Books of TanuJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Jan Bills Receivable A/c Dr. 10,000
To Harsh 10,000
(Harsh’s acceptance received)
01 Jan Bank A/c Dr. 9,933
Discount A/c 67
To Bills Receivable A/c 10,000
(Harsh’s acceptance discounted at 8% p.a.for one month)
04 Feb Harsha Dr. 10,000
To Bank A/c 10,000
(Harsh’s account settled by paying amountdue to Harsh through cheque)
Books of HarshJournal
Date Particulars L.F. Debit ₹ Credit₹
2017
01 Jan Tanu Dr. 10,000
To Bills Payable A/c 10,000
(Bill drawn by Tanu accepted)
04 Feb Bank A/c Dr. 10,000
To Tanu 10,000
(Cheque received from Tanu)
04 Feb Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
(Bill drawn by Tanu met on due date)

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