NCERT Solutions for Class 11 Accountancy Financial Accounting Part-1 Chapter 8

Short answers : Solutions of Questions on Page Number : 322

Q1 :Name any two types of commonly used negotiable instruments.
Answer :
The two types of commonly used negotiable instruments are:
1. Cheques
2. Bills of exchange

NCERT Solutions for Class 11 Accountancy Financial Accounting Part-1 Chapter 8 – Bills of Exchange

Q2 :Write two points of distinction between bills of exchange and promissory note.
Answer :

Basis of Difference	Bills of Exchange	Promissory Note
Drawer	It is drawn by a creditor.	It is drawn by a debtor.
Parties	There are three parties involved, namely drawer, drawee and payee.	There are two parties involved, namely maker and payee.

Q3 :State any four essential features of bill of exchange.
Answer :
The four essential features of bills of exchange are:
1. It must be a written document.
2. It is an unconditional order to pay by the drawer to the drawee.
3. The maker of bill must sign it, without which it will not be a legal proof.
4. The amount to be paid along with its expiry date must be specifically mentioned (both in figures and words) in a bill of exchange.

Q4 :State the three parties involved in a bill of exchange.
Answer :
The following three parties are involved in a bill of exchange.
1. Drawer who makes the bill
2. Drawee who accepts the bill
3. Payee who receives the payment

Q5 :What is meant by maturity of a bill of exchange?
Answer :
Maturity of a bill means a date on which the bill is due for payment. Maturity date of the bill differs on the basis of the terms and conditions of the bill. There are three types of bill, viz. after date bill, after sight bill and at sight bill.
1. After date bill: In case of after date bill, the payment of the bill is made on the maturity date of the bill. The maturity date of the bill is ascertained by adding three days of grace period with the specified period of the bill (which starts from the date of drawing). For example, if a bill is drawn on 1^st March, 2011 and payable after one month; its maturity date is 4^th April. If the maturity date happens to be a gazetted holiday, then the bill is due for payment one day before. However, if the maturity date happens to be a casual holiday, then the bill is due for payment after one day.
2. After sight bill: In case of after sight bill, the payment of the bill is made on the maturity date of the bill. The maturity date of the bill is ascertained by adding three days of grace period with the specified period of the bill (which starts from the date of acceptance by the drawee). For example, if a one month bill is drawn on 1^st March, 2011 and is accepted by the drawee on 5^th March, 2011; its maturity date is 8^th April. In this case, the date of the bill starts from 5^th March and not from 1^st March. If the maturity date happens to be a gazetted holiday, then the bill is payable one day before. However, if the maturity date happens to be a casual holiday, then the bill is payable after one day.
3. At sight bill: In case of at sight bill, the due date of the bill is considered as and when the bill is presented for payment by the holder of the bill. In this case, there is no grace period. The bill becomes due whenever it is presented for payment.

Q6 :What is meant by dishonour of a bill of exchange?
Answer :
Dishonour of a bill happens when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hence, liability of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer

Acceptor A/c		Dr.
	To Bills Receivable A/c
(Bill dishonoured)

In the books of acceptor/drawee

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

Q7 :Name the parties to a promissory note
Answer :
The parties to a promissory note are given below.
1. Promissor, who makes the note and undertakes to pay the amount of promissory note.
2. Payee, who receives the payment.

Q8 :What is meant by acceptance of a bill of exchange?

Q3 : Vishal sold goods for Rs 7,000 to Manju on Jan 05, 2006 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.
Answer:

Books of Vishal
Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.05	Manju			Dr.		7,000
		To Sales A/c					7,000
	(Goods sold to Manju)

Jan.05	Bills Receivable A/c			Dr.		7,000
			To Manju				7,000
	(Manju’s acceptance received for two months)

Jan.05	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 Rs	Credit Amount Rs
2011
Jan.05	Purchases A/c			Dr.		7,000
			To Vishal				7,000
	(Goods purchased from Vishal)

Jan.05	Vishal			Dr.		7,000
		To Bills Payable A/c					7,000
	(Bill drawn by Vishal accepted)

Mar.08	Bills Payable A/c			Dr.		7,000
		To Bank A/c					7,000
	(Amount of Bill Payable paid to bank on maturity)

Answer : A bill is drawn in favour of a person from whom the amount is due. In other words, a bill of exchange is drawn by the creditors on his/her debtors to make payment of specific amount, on a mentioned date. Generally, a bill is drawn by a seller to a purchaser. Purchaser accepts the bill for the amount due on account of the credit sales. The bill may be accepted for the amount due other than credit purchases, such as commission payable, salary outstanding, etc. A bill cannot come into existence without the acceptance of a debtor.

Q9 :What is Noting of a bill of exchange.
Answer :
When a bill is presented for payment and acceptor fails to make payment, the bill gets dishonoured. In order to keep a legal proof of dishonour, the bill gets noted by the Notary public (which is approved by the government). In exchange of the Notary service, Notary public charges fees, known as Noting charges. Notary public notes the following facts:
1. Date and amount of the bill
2. Reasons for dishonour
3. Amount of Noting charges

Q10 :What is meant by renewal of a bill of exchange?
Answer : When an acceptor of a bill does not have sufficient fund to meet the obligations of the bill on time, he/she requests the drawer for extension (of time) for payment. If the drawer agrees, then a new bill is drawn which is known as renewal of bill. Generally, a bill is renewed on the condition that the drawee has to pay interest for the extended period.

Q11 :Give the performa of a Bills Receivable Book.
Answer :

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

Q12 :Give the performa of a Bills Payable Book.
Answer :

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

Q13 :What is retirement of a bill of exchange?
Answer : When a holder receives the amount of a bill before the maturity date on the request of the acceptor, then it is called retirement of the bill of exchange. Holder of the bill may give discount for such earlier payment. This discount is termed as ‘rebate’.
Entry in the books of the holder of the bill

Cash A/c		Dr.
Rebate A/c		Dr.
	To Bills Receivable A/c
(Bill amount received before maturity and rebate allowed)

Entry in the books of the acceptor (drawee) of the bill

Bills Payable A/c		Dr.
	To Cash A/c
	To Rebate A/c
(Bill paid and received rebate for early payment)

Q14 :Give the meaning of rebate.
Answer : If the drawee expresses his/her wish to pay the bill before the due date to the holder, and if the holder accepts his/her request, then on account of the early payment, the holder may give some discount. This discount is termed as rebate. In other words, rebate is a discount given by the holder to the drawee (or acceptor) for his/her request of early payment of the bill before the due date. It is an expense for the drawer and hence, is debited to the drawer’s books. On the other hand, as it is a gain for the acceptor of bill, so it is credited in the drawee’s books.

Entry in the books of drawer of the bill:

Cash A/c		Dr.
Rebate A/c		Dr.
	To Bills Receivable A/c
(Bill honoured before maturity)

Entry in the books of drawee of the bill:

Bills Payable A/c		Dr.
	To Cash A/c
	To Rebate A/c
(Bill paid and rebate received)

Q15 :Give the performa of a Bill of Exchange.
Answer :
Performa of a Bill of exchange is given below.

Mr. X (The Drawer)

Rs 25,000

New Delhi

May 01, 2011

Two months after date pay to me or my order, the sum of
rupees twenty five thousand only, for value received

Accepted

(Signed)

Mr. Z (The Drawee)

May 01, 2011

Tilak Nagar,

New Delhi 110018

(Signed)

Mr. X

Janak Puri, New Delhi

110032

Long answers : Solutions of Questions on Page Number : 322

Q1 :A bill of exchange must contain an unconditional promise to pay. Do you agree with a statement?
Answer : According to Negotiable Instrument Act, 1981, “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.”
A bill of exchange contains an unconditional promise to pay a certain sum of money on an agreed date to the drawer or the bearer by the drawee of the bill.
An unconditional order to pay: It is one of the important characteristic of a negotiable instrument. Unconditional order implies no condition should be attached by the acceptor regarding the payment. The conditions like, payment of bill (only in case of profit on sales), payment of bill (only if the prices of goods increase), etc. should not be attached with the bill. Moreover, the language of the bill should not be ambiguous.

Q2 :Briefly explain the effects of dishonour and noting of a bill of exchange.
Answer : When a bill is presented for payment and the acceptor fails to make the payment, the bill gets dishonoured. In this situation, liability of the acceptor is restored.
Entry in the books of drawer (if Noting charges are not paid):

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

Entry in the books of drawee:

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

Noting charges are charged by the notary public for keeping a proof that the bill is dishonoured. The noting charges are paid by the holder of the bill but actually due on the drawee or the acceptor of the bill..

1. Date and amount of bill

2. Reasons for dishonour

3. Amount of noting charges

Effect of Noting charges in the books of holder of bill (if Noting charges are paid):

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

Q3 : Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.
Answer :
The procedure to calculate the date of maturity of a bill of exchange is given below.
1. Ascertain the date on which the bill will be honoured.
2. Add three days of grace to the above date.
For example, a bill with maturity period of one month is drawn on 1st July and due date is 1st September. Then add 3 days of grace and payment will be made on 4th September.
Days of grace depend on the following situations:
1. Declared holidays: If the payment day happens to be a national holiday or Sunday, then the preceding day becomes the payment day.
For example,
If a bill is drawn on 12^th July and its due date is 12^th August, then after adding 3 days of grace the maturity day is 15^th August. However, as 15^th August is a national holiday; so, 14^th August becomes the payment day.
If a bill is drawn on 1^st May and the maturity period is of one month, then the due date is 1^st June. After adding 3 days of grace, the payment date becomes 4^th June. However, if 4^th June happens to be a Sunday, then the payment will be made on 3^rd June.
2. Undeclared holidays: If the payment day happens to be an emergency holiday, then the succeeding day becomes the payment day. For example, if a bill is drawn on 1^st May and is payable after 15 days, then, after adding 3 days of grace period, the due date becomes 18^th May. However, if a national strike is declared on 18th May, then 19^th May becomes the due date of the bill.

Q4 :Distinguish between bill of exchange and promissory note.
Answer :

Basis of Difference	Bills of Exchange	Promissory Note
Order or promise	It is an order to pay.	It is a promise to pay.
Parties	There are three parties involved, drawer, acceptor and payee.	There are two parties involved, maker and payee.
Drawer	It is drawn by the creditor.	It is drawn by the debtors.
Acceptance	It needs acceptance by the drawee.	As it is prepared by promissor, so no acceptance is required.
Payee	Drawer and payee may be the same.	Promissor cannot be the payee.
Noting	In case of dishonour of the bill, the bill may get noted.	Noting is not necessary.
Liability	Drawer is not primarily liable.	Promissor is the primarily liable.

Q5 :Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.
Answer :
When a holder receives the amount of a bill before the maturity date on request of the acceptor, it is called retirement of the bill of exchange. Holder of the bill may give discount for such earlier payment. This discount is termed as ‘rebate’.
Rebate is given by the holder to the acceptor of the bill on account of payment before the due date. Rebate is a loss for the holder of the bill; so, it is debited in the books of the holder when payment is received.

Cash A/c		Dr.
Rebate A/c		Dr.
	To Bills Receivable A/c
(Payment received and rebate allowed for early payment)

Acceptor of the bill gets rebate for the payment made before the due date. The rebate is a gain for the drawee; so, it is credited in the books of the drawee.

Bills Payable A/c		Dr.
	To Cash A/c
	To Rebate A/c
(Bill paid before the due date and rebate received for early payment)

Q6 :Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.
Answer :
Bills Receivable Book is a special purpose book that is maintained to keep records of bills received from the debtors. It contains details such as acceptor’s name, date of bill, due date, amount, etc. for future references. It is totalled periodically and its balance is transferred to the debit side of the bills receivable account.
Benefits of Maintaining the Bill Receivable Book
1. Availability of information: All the information related to the bills receivable, such as amount, due date, etc., are recorded at one place and hence are easily accessible.
2. Possibility of fraud: Since all the bills are recorded at one place, possibility of fraud is minimised.
3. Responsibility: The person who maintains the bills receivable book will also be responsible for any errors or omissions. Therefore, higher degree of accountability and responsibility exists. Also, if any error is detected, then it can be fixed quickly.
4. Time efficient: Recording of bills receivable through the bills receivable book takes lesser time than that of journal entry. Therefore, it saves time of the accountant in recording numerous transactions of repetitive and routine nature.

Q7 :Briefly explain the benefits of maintaining a Bills Payable Book and state how is its posting is done in the ledger?
Answer : A Bills Payable Book is a special purpose book, maintained to keep records of acceptance of bills, given to the creditors. It contains details of the amount, date of bill, due date, to whom acceptance is given, etc., for future references. It is totalled periodically and its balance is transferred to the credit side of the bills payable account.
Benefits of Maintaining Bills Payable Book
1. Availability of information: All the information related to the bills payable are recorded at one place, such as the amount, due date, etc.
2. Possibility of fraud: Since all the bills are recorded at one place, possibility of fraud is minimised.
3. Responsibility: All the transactions are recorded by the same person. Therefore, errors can be easily detected and rectified. This leads to a higher degree of responsibility and accountability of the accountant.

Numerical questions : Solutions of Questions on Page Number : 323

Q1 : On Jan 01, 2006 Rao sold goods Rs 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.
Answer :

Books of Rao
Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Reddy		Dr.		10,000
		To Sales A/c				10,000
	(Goods sold to Reddy)

Jan.01	Cash A/c		Dr.		5,000
		To Reddy				5,000
	(Cash received from Reddy)

Jan.01	Bills Receivable A/c		Dr.		5,000
		To Reddy				5,000
	(Bill received for 30 days accepted by Reddy)

Feb.03	Cash A/c		Dr.		5,000
		To Bills Receivable A/c				5,000
	(Reddy’s acceptance met on due date)

Books of Reddy
Rao’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
Jan.01	Cash		5,000	2011
Jan.01	Bills Receivable		5,000	Jan.01	Purchases		10,000

			10,000				10,000

Q2 : On Jan 01,2006, Shankar purchased goods from Parvati for Rs 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.
Answer:

Books of Parvati
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Shankar		Dr.		8,000
		To Sales A/c				8,000
	(Goods sold to Shankar)

Jan.01	Bills Receivable A/c		Dr.		8,000
		To Shankar				8,000
	(Promissory Note received from Shankar for three months)

Apr.05	Cash A/c		Dr.		8,000
		To Bills Receivable A/c				8,000
	(Cash received for Promissory Note one day after the maturity date on account of holiday declared by Govt.)

Books of Shankar
Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Purchases A/c			Dr.		8,000
		To Parvati					8,000
	(Goods purchased from Parvati)

Jan.01	Parvati			Dr.		8,000
			To Bills Payable A/c				8,000
	(Promissory note for three months sent to Parvati)

Apr.5	Bills Payable A/c			Dr.		8,000
			To Cash A/c				8,000
	(Cash paid on maturity of promissory note)

Books of Vishal
Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.05	Manju			Dr.		7,000
		To Sales A/c					7,000
	(Goods sold to Manju)

Jan.05	Bills Receivable A/c			Dr.		7,000
			To Manju				7,000
	(Manju’s acceptance received for two months)

Jan.05	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 Rs	Credit Amount Rs
2011
Jan.05	Purchases A/c			Dr.		7,000
			To Vishal				7,000
	(Goods purchased from Vishal)

Jan.05	Vishal			Dr.		7,000
		To Bills Payable A/c					7,000
	(Bill drawn by Vishal accepted)

Mar.08	Bills Payable A/c			Dr.		7,000
		To Bank A/c					7,000
	(Amount of Bill Payable paid to bank on maturity)

Q4 :On Feb 01, 2006, John purchased goods for Rs 15,000 from Jimmy. He immediately made a payment of Rs 5,000 by cheque and for the balance accepted the bill of exchange drawn upon him by Jimmy. The bill of exchange was payable after 40 days. Five days before the maturity of the bill, Jimmy 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 Jimmy. Prepare John’s account in the books of Jimmy and Jimmy account in the books of John.
Answer:

Books of Jimmi
Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	John			Dr.		15,000
			To Sales A/c				15,000
	(Goods sold to John)

Feb.01	Bank A/c			Dr.		5,000
			To John				5,000
	(Cheque received for Rs 5,000 from John)

Feb.01	Bills Receivable A/c			Dr.		10,000
			To John				10,000
	(Bill received from John for 40 days)

Mar.10	Bill Sent for Collection A/c			Dr.		10,000
			To Bills Receivable A/c				10,000
	(John’s acceptance sent to bank for collection)

Mar.15	Bank A/c			Dr.		10,000
			To Bill Sent for Collection A/c				10,000
	(John’s acceptance met on due date and bank received the payment)

Ledger John’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.01	Sales		15,000	Feb.01	Bank		5,000
				Feb.01	Bills Receivable		10,000

			15,000				15,000

Books of John
Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c				Dr.		15,000
			To Jimmi					15,000
	(Goods purchased from Jimmi)

Feb.01	Jimmi				Dr.		5,000
				To Bank A/c				5,000
	(Cheque paid to Jimmi)

Feb.01	Jimmi				Dr.		10,000
			To Bills Payable A/c					10,000
	(Bill drawn by Jimmi accepted for 40 days)

Mar.15	Bills Payable A/c				Dr.		10,000
				To Bank A/c				10,000
	(Payment of bill made on maturity to bank)

Ledger Jimmi’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.01	Bank		5,000	Feb.01	Purchases		15,000
Feb.01	Bills Payable		10,000

			15,000				15,000

Q5 : On Jan 15, 2006, Kartar Sold goods for Rs 30,000 to Bhagwan and drew upon him three bills of exchanges of Rs 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.
Answer :

Journal Entries in the Books of Kartar
Date			Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Bhagwan				Dr.		30,000
		To Sales A/c						30,000
	(Goods sold to Bhagwan)

Jan.15	Bills Receivable A/c				Dr.		10,000
		To Bhagwan						10,000
	(Three bills of Rs 10,000 each, received from Bhagwanâ€“first bill for one month, second bill for two months and third bill for three months)

Jan.15	Ratna			Dr.			10,000
		To Bills Receivable A/c						10,000
	(Second bill endorsed to Ratna)

Jan.15	Bank A/c			Dr.			9,850
	Discount A/c			Dr.			150
		To Bills Receivable A/c						10,000
		(B/R discounted)
Feb.19	Cash A/c			Dr.			10,000
		To Bills Receivable A/c						10,000
	(First bill for one month met by Bhagwan, on due date)

Bhagwana’s Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Jan. 15	Sales A/c		30,000	Jan. 15	Bills Receivable A/c		30,000
			30,000				30,000

Ratna’s Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Jan. 15	Bills Receivable A/c		10,000	Jan. 15	Balance b/d		10,000
			10,000				10,000

Bills Receivable Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Jan. 15	Bhagwan		30,000	Jan. 15	Ratna		10,000
				Jan. 15	Bank A/c		9,850
				Jan. 15	Discount A/c		150
				Feb. 19	Cash		10,000
			30,000				30,000

Cash Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Feb. 19	Bills Receivable		10,000	Feb. 19	Balance c/d		10,000
			10,000				10,000

Bank’s Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Jan. 15	Bills Receivable		9,850	Jan. 15	Balance c/d		9,850
			9,850				9,850

Journal Entries in the Books of Bhagwan
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Purchases A/c			Dr.		30,000
		To Kartar					30,000
	(Good purchased from Kartar on credit)

Jan.15	Kartar			Dr.		30,000
		To Bills Payable A/c					30,000
	(Three bill Rs 10,000 each drawn by Kartarâ€“ The first bill for one month, the second bill for two months and the third bill for three months, accepted and returned them to Kartar)

Feb.19	Bills Payable A/c			Dr.		10,000
		To Cash A/c					10,000
	(First bill was paid on due date)

Mar.19	Bills Payable A/c			Dr.		10,000
		To Bank A/c					10,000
	(Second bill was paid on due date to Ratna)

Apr.19	Bills Payable A/c			Dr.		10,000
		To Bank A/c					10,000
	(Third bill was paid on due date to bank)

Kartar’s Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Jan. 15	Bills Payable A/c		30,000	Jan. 15	Purchases		30,000
			30,000				30,000

Bills Payable Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Feb. 19	Cash A/c		10,000	Jan. 15	Kartar		30,000
Mar. 19	Bank A/c		10,000
Apr. 19	Bank A/c		10,000
			30,000				30,000

Cash Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011				2011
Feb. 19	Balance b/d		10,000	Feb. 19	Bills Payable A/c		10,000
			10,000				10,000

Q6 : On Jan. 01, 2006 Arun sold goods for Rs 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 Jounalise the above transactions in the books of Arun and Sunil.
Answer :

Journal Entries in the Books of Arun
Date			Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Sunil			Dr.			30,000
		To Sales A/c						30,000
	(Goods sold to Sunil)

Jan.01	Cash A/c			Dr.			14,700
	Discount Allowed A/c			Dr.			300
		To Sunil						15,000
	(Half of the amount due from Sunil was received and allowed him 2% Cash Discount)

Jan.01	Bills Receivable A/c			Dr.			15,000
		To Sunil						15,000
	(Promissory note received for 20 days from Sunil for balance amount due from Sunil)

Jan.23	Cash A/c				Dr.		15,000
		To Bills Receivable A/c						15,000
	(Cash received from Sunil for B/R one day before maturity, as per negotiable instrument act, if the date of maturity is holiday, negotiable instrument will be met one day before maturity)

NoteDate of maturity of the promissory note is Jan. 24, 2011, on account of holiday, it will be presented one day earlier that is on Jan. 23, 2011

Journal Entries in the Book of Sunil
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Purchases A/c			Dr.		30,000
		To Arun					30,000
	(Goods purchased from Arun)

Jan.01	Arun			Dr.		15,000
		To Cash A/c					14,700
		To Discount Received A/c					300
	(Half amount due to Arun paid by cheque and 2% discount allowed by him)

Jan.01	Arun			Dr.		15,000
		To Bills Payable A/c					15,000
	(Promissory note issued in favour of Arun for twenty days)

Jan.23	Bills Payable A/c			Dr.		15,000
		To Cash A/c					15,000
	(Promissory note met one day before the maturity day)

Q7 : Darshan sold goods for Rs 40,000 to Varun on 8.1.2006 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.
Answer :
Case (i): When the bill was retained by Darshan till the date of its maturity

Journal Entries in the Books of Darshan
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Varun			Dr.		40,000
			To Sales A/c				40,000
	(Goods sold to Varun)

Jan.08	Bills Receivable A/c			Dr.		40,000
		To Varun					40,000
	(Varun’s acceptance received for two months)

Mar.11	Cash A/c			Dr.		40,000
		To Bills Receivable A/c					40,000
	(Payment for B/R received for B/R)

Journal Entries in the Books of Varun
Date		Particulars				L.F	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)

Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill of two months accepted for Darshan)

Mar.11	Bills Payable A/c				Dr.		40,000
		To Cash A/c						40,000
	(Varun cleared his acceptance on the due date)

Case (ii): When Darshan immediately discounted the bill @ 6% p.a. with the bank.

Journal Entries in the Books of Darshan

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

2011

Jan.08

Varun

Dr.

40,000

To Sales A/c

40,000

(Goods sold to Varun)

Jan.08

Bills Receivable A/c

Dr.

40,000

To Varun

40,000

(B/R received from Varun for two months)

Jan.08

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.)

Journal Entries in the Books of Varun
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)

Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill of two months accepted for Darshan)

Mar.11	Bills Payable A/c				Dr.		40,000
		To Bank A/c						40,000
	(Varun cleared his acceptance on the due date)

Case (iii): When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

Journal Entries in the Books of Darshan
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Varun			Dr.		40,000
		To Sales A/c					40,000
	(Goods sold to Varun)

Jan.08	Bills Receivable A/c			Dr.		40,000
		To Varun A/c					40,000
	(Varun’s acceptance received for two months)

Jan.08	Suresh A/c			Dr.		40,000
		To Bills Receivable A/c					40,000
	(Varun’s acceptance endorsed in favour of Suresh)

Journal Entries in the Books of Varun
Date		Particulars				L.F	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)

Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill drawn by Darshan accepted for two months)

Mar.11	Bills Payable A/c				Dr.		40,000
		To Cash A/c						40,000
	(Bill paid to the holder of bill)

Case (iv): When three days before its maturity, the bill, as sent by Darshan to his bank for Collection.

Journal Entries in the Books of Darshan
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Varun A/c			Dr.		40,000
			To Sales A/c				40,000
	(Goods sold to Varun)

Jan.08	Bills Receivable A/c			Dr.		40,000
		To Varun A/c					40,000
	(Varun’s acceptance received for two months)

Mar.08	Bill Sent for Collection A/c			Dr.		40,000
		To Bills Receivable A/c					40,000
	(Bill sent for collection sent to the bank)

Mar.11	Bank A/c			Dr.		40,000
		To Bill Sent for Collection					40,000
	(Bill amount was met)

Journal Entries in the Books of Varun
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)

Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill drawn by Darshan accepted for two months)

Mar.11	Bills Payable A/c				Dr.		40,000
		To Bank A/c						40,000
	(Bill paid to the bank)

Q8 : 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 Rs
Dec.21, 2005	1,000
Dec.26, 2005	1,200
Dec.18, 2005	2,000
Dec.31, 2005	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, 2005 was retained by Bansal Traders with them till the date of its maturity. The promissory note drawn on 26.12.2005 was discounted by Bansal Traders from their bank at 12% p.a. The promissory note drawn on Dec. 28, 2005 was endorsed by Bansal Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to Rs 1,900. On 25.1.2006 Bansal Traders sent the promissory note drawn on Dec. 31, 2005 to their bank for collection. All the promissory notes were met by Mohan Trade Rs 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 Trade Rs
Answer:

Journal Entries in the Books of Bansal Traders
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2010
Dec.21	Mohan Traders			Dr.		900
			To Sales A/c				900
	(Goods sold to Mohan Traders list price Rs 1,000 at 10% trade discount)

2010
Dec.21	Bills Receivable A/c			Dr.		900
			To Mohan Traders				900
	(Promissory note received from Mohan Traders payable after 30 days)

2010
Dec.26	Mohan Traders			Dr.		1,080
			To Sales A/c				1,080
	(Goods sold to Mohan Traders list price Rs 1,200 at 10% trade discount)

2010
Dec.26	Bills Receivable A/c			Dr.		1,080
			To Mohan Traders				1,080
	(Promissory note received from Mohan Traders)

2010
Dec.26	Bank A/c			Dr.		1,071
	Discount A/c			Dr.		9
			To Bills Receivable A/c				1,080
	(Promissory note discounted from the Bank)

2010
Dec.28	Mohan Traders A/c			Dr.		1,800
			To Sales A/c				1,800
	(Goods sold to Mohan Traders list price Rs 2,000 at 10% trade discount)

2010
Dec.28	Bills Receivable A/c			Dr.		1,800
			To Mohan Traders A/c				1,800
	(Promissory note received from Mohan Traders)

2010
Dec.28	Dream Soaps A/c			Dr.		1,900
			To Bills Receivable A/c				1,800
			To Discount Received A/c				100
	(Promissory note of Rs 1,800 sent to Dream Soap in full settlement of amount due to him)

2010
Dec.31	Mohan Traders			Dr.		4,500
			To Sales A/c				4,500
	(Goods sold to Mohan trades list price Rs 5,000 at 10% trade discount)

2010
Dec.31	Bills Receivable A/c			Dr.		4,500
			To Mohan Traders				4,500
	(Promissory note received from Mohan Traders for 30 days)

2011
Jan.23	Cash A/c			Dr.		900
			To Bills Receivable A/c				900
	(Promissory note issued on Dec. 21, 2005 was met on maturity)

2011
Jan.25	Bill Sent for collection A/c			Dr.		4,500
			To Bills Receivable A/c				4,500
	(Promissory note issued on Dec. 31, 2005 sent for collection to bank)

2011
Feb.02	Bank A/c			Dr.		4,500
			To Bill Sent for Collection A/c				4,500
	(Bank got payment of bill sent for collection on due date)

In the books of Bansal Traders Mohan Trader’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.		Amount Rs
2010				2010
Dec.21	Sales		900	Dec.21	Bills Receivable			900
Dec.26	Sales		1,080	Dec.26	Bills Receivable			1,080
Dec.28	Sales		1,800	Dec.28	Bills Receivable			1,800
Dec.31	Sales		4,500	Dec.31	Bills Receivable			4,500
			8,280					8,280

Journal Entries in the Books of Mohan Trader’s
Date			Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2010
Dec.21	Purchases A/c			Dr.			900
		To Bansal Traders						900
	(Goods bought from Bansal Trader’s list price Rs 1,000 at 10% trade discount)

2010
Dec.21	Bansal Trader			Dr.			900
		To Bills Payable A/c						900
	(Promissory note issued Bansal Traders for Rs 900)

2010
Dec.26	Purchases A/c			Dr.			1,080
		To Bansal Traders						1,080
	(Goods bought from Bansal Traders list price Rs 1,200 at 10% Trade discount)

2010
Dec.26	Bansal Traders			Dr.			1,080
		To Bills Payable A/c						1,080
	(Promissory note received from Bansal Traders)

2010
Dec.28	Purchases A/c			Dr.			1,800
		To Bansal Traders						1,800
	(Goods bought from Bansal Traders list price Rs 2,000 at 10% trade discount)

2010
Dec.28	Bansal Traders			Dr.			1,800
		To Bills Payable A/c						1,800
	(Promissory note issued to Bansal Traders)

2010
Dec.31	Purchases A/c			Dr.			4,500
		To Bansal Traders						4,500
	(Goods bought from Bansal Traders of list price Rs 5,000 at 10% trade discount)

2010
Dec.31	Bansal Traders			Dr.			4,500
		To Bills Payable A/c						4,500
	(Promissory note issued to Bansal Traders)

2011
Jan.23	Bills Payable A/c			Dr.			900
		To Cash A/c						900
	(The first promissory note discharged on its due date)

2011
Jan.28	Bills Payable A/c			Dr.			1,080
		To Bank A/c						1,080
	(The second promissory note discharged on its due date)

2011
Jan.30	Bills Payable A/c			Dr.			1,800
		To Cash A/c						1,800
	(The third promissory discharged by paying Rs 1,800 to Dream Soaps)

2011
Feb.02	Bills Payable A/c				Dr.		4,500
		To Bank A/c						4,500
	(The fourth promissory note discharged by paid Rs 4,500 to Bank)

In the books of Mohan Traders BansalTrader’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2010				2010
Dec.21	Bills Payable		900	Dec.21	Purchases		900
Dec.26	Bills Payable		1,080	Dec.26	Purchases		1,080
Dec.28	Bills Payable		1,800	Dec.28	Purchases		1,800
Dec.31	Bills Payable		4,500	Dec.31	Purchases		4,500
			8,280				8,280

Q9 :Narayanan purchased goods for Rs 25,000 from Ravinderan on Feb. 01, 2006. Ravinderan 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 Ravinderan and Narayanan in following cases:
When the bill was retained by Ravinderan with him till the date of its maturity.
When the bill was discounted by Ravinderan immediately with his bank @ 6% p.a.
When the bill was endorsed to his creditor Ganeshan.
When the bill was sent by Ravinderan to his bank for collection a few days before it maturity.
Answer:
Case (i) : When the bill was retained by Ravinderan with him till the date of its maturity

Books of Ravinderan
Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Narayanan			Dr.		25,000
		To Sales A/c					25,000
	(Goods sold to Narayanan)

Feb.01	Bills Receivable A/c			Dr.		25,000
		To Narayanan					25,000
	(Narayanan’s acceptance received for 30 days)

Mar.05	Narayanan			Dr.		25,000
		To Bills Receivable A/c					25,000
	(Narayanan failed to meet his acceptance and bill dishonoured)

Books of Narayanan
Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c			Dr.		25,000
			To Ravinderan				25,000
	(Goods bought from Ravinderan)

Feb.01	Ravinderan			Dr.		25,000
			To Bills Payable A/c				25,000
	(Ravinderanâ€™s bill accepted)

Mar.05	Bills Payable A/c			Dr.		25,000
			To Ravinderan A/c				25,000
	(Bill dishonoured on maturity)

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

Books of Ravinderan
Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs

2011
Feb.01	Narayanan			Dr.		25,000
			To Sales A/c				25,000
	(Goods sold to Narayanan)

Feb.01	Bills Receivable A/c			Dr.		25,000
			To Narayanan				25,000
	(Narayanan’s acceptance received)

Feb.01	Bank A/c			Dr.		24,875
	Discount A/c			Dr.		125
			To Bills Receivable A/c				25,000
	(Narayanan’s acceptance got discounted with bank @ 6% p.a.)

Mar.05	Narayanan					25,000
			To Bank A/c				25,000
	(Narayanan’s acceptance dishonoured)

Books of Narayanan
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c		Dr.		25,000
		To Ravinderan				25,000
	(Goods bought from Raivnderan)

Feb.01	Ravinderan		Dr.		25,000
		To Bills Payable A/c				25,000
	(Ravinderanâ€™s bill accepted)

Mar.05	Bills Payable A/c		Dr.		25,000
		To Ravinderan				25,000
	(Bill dishonoured on maturity)

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

Books of Ravinderan
Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs

2011
Feb.01	Narayanan				Dr.		25,000
			To Sales A/c					25,000
	(Goods sold to Narayanan)

Feb.01	Bills Receivable A/c				Dr.		25,000
				To Narayanan				25,000
	(Narayanan’s acceptance received)

Feb.01	Ganeshan				Dr.		25,000
			To Bills Receivable A/c					25,000
	(Narayanan’s acceptance endorsed in favour of Ganeshan)

Mar.05	Narayanan				Dr.
			To Ganeshan A/c					25,000
	(Narayanan’s acceptance dishonoured)

Books of Narayanan
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c		Dr.		25,000
		To Ravinderan				25,000
	(Goods bought from Ravinderan)

Feb.01	Ravinderan		Dr.		25,000
		To Bills Payable A/c				25,000
	(Ravinderanâ€™s bill accepted)

Mar.05	Bills Payable A/c		Dr.		25,000
		To Ravinderan				25,000
	(Ravinderanâ€™s bill dishonoured on due date)

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

Books of Ravinderan
Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs

2011
Feb.01	Narayanan				Dr.		25,000
				To Sales A/c				25,000
	(Goods sold to Narayanan)

Feb.01	Bills Receivable A/c				Dr.		25,000
				To Narayanan				25,000
	(Narayanan’s acceptance received)

Feb.01	Bill Sent for Collection A/c				Dr.		25,000
				To Bills Receivable A/c				25,000
	(Bill sent to bank for collection)

Mar.05	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 Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c		Dr.		25,000
		To Ravinderan				25,000
	(Bought goods from Ravinderan)

Feb.01	Ravinderan		Dr.		25,000
		To Bills Payable A/c				25,000
	(Ravinderanâ€™s bill accepted)

Mar.05	Bills Payable A/c		Dr.		25,000
		To Ravinderan				25,000
	(Ravinderanâ€™s bill dishonoured)

Q10 : Ravi sold goods for Rs 40,000 to Sudershan on Feb 13, 2006. He drew four bills of exchange upon Sudershan. The first bill was for Rs 5,000 payable after one month. The second bill was for Rs 10,000 payable after 40 days; the third bill was for Rs 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 Rs 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.
Answer :

Books of Ravi

Journal

Date

Particulars

L.F.

Debit Amount

Credit Amount Rs

2011

Feb.13

Sudershan

Dr.

40,000

To Sales A/c

40,000

(Goods sold to Sudershan)

Feb.13

Bills Receivable A/c

Dr.

40,000

To Sudershan

40,000

(Four bills from Sudershan received: the first for Rs

5,000, the second bill for Rs 10,000, the third bill for

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

Feb.13

Bank A/c

Dr.

4,975

Discount A/c

Dr.

To Bills Receivable A/c

5,000

(The first bill discounted with bank at 6% p.a.)

Feb.13

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 settlement

of amount due to him)

Mar.03

Bill Sent for Collection A/c

Dr.

13,000

To Bills Receivable A/c

13,000

(The fourth bill sent to bank for collection)

Mar.07

Sudershan

Dr.

13,000

To Bill Sent for Collection A/c

13,000

(The fourth bill dishonoured on due date)

Mar.07

Sudershan

Dr.

To Interest A/c

(Interest due on the fourth bill Rs 13,000 for 19

days at 12% p.a,)

Mar.10

Cash A/c

Dr.

13,081

To Sudershan

13,081

(Cash received from Sudershan)

Mar.16

Sudershan

Dr.

5,000

To Bank A/c

5,000

(The first bill dishonoured)

Mar.16

Sudershan

Dr.

To Interest A/c

(Interest due on amount Rs 5,000 at 12%

for one month)

Mar.19

Cash A/c

Dr.

5,050

To Sudershan A/c

5,050

(Sudershan paid the amount due on account

dishonoured of the first bill plus interest)

Mar.28

Sudershan

Dr.

10,000

Discount Received A/c

Dr.

200

To Mustaq

10,200

(The second bill dishonoured, which had endorsed

in favour of Mustaq)

Mar.28

Sudershan

Dr.

132

To Interest A/c

132

(Interest charged at 12% on the amount due on account

of dishonour of the second bill Rs 10,000)

Apr.01

Cash A/c

Dr.

10,132

To Sudershan A/c

10,132

(Received cash from Sudershan for the second bill

along 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 due

on account of dishounor the third bill Rs 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.)

Ledger Sundershan’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.13	Sales		40,000	Feb.13	Bills Receivable		40,000
Mar.07	Bill sent for Collection		13,000	Mar.10	Cash		13,081
Mar.07	Interest		81	Mar.19	Cash		5,050
Mar.16	Bank		5,000	Apr.01	Cash		10,132
Mar.16	Interest		50	May19	Cash		12,360
Mar.28	Mustaq		10,000
Mar.28	Interest		132
May 16	Bills Receivable		12,000
May 16	Interest		360

			80,623				80,623

Mustaq’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.13	B/R		10,000	Mar.28	Sudershan		10,000
Feb.13	Discount Received		200	Mar.28	Discount Received		200

			10,200				10,200

Books of Sudershan
Journal
Date				Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.13	Purchases A/c				Dr.				40,000
			To Ravi							40,000
	(Goods bought from Ravi)

Feb.13	Ravi				Dr.				40,000
		To Bills Payable A/c								40,000
	(Four bills drawn by Ravi accepted: the first bill for Rs 5,000 payable after one month, the second for Rs 10,000 payable after 40 days, the third for Rs 12,000 payable after 3 months and the fourth for Rs 13,000 payable after 19 days)

Mar.07	Bills Payable A/c						Dr.		13,000
				To Ravi						13,000
	(The fourth bill dishonoured)

Mar.07	Interest A/c						Dr.		81
		To Ravi								81
	(Interest charged for the amount of fourth bill at 12% p.a.)

Mar.10	Ravi						Dr.		13,081
				To Cash A/c						13,081
	(Cash paid to Ravi for amount due on account of dishounor of the fourth bill along with interest at 12% p.a. for 19 days)

Mar.16	Bills Payable A/c				Dr.				5,000
				To Ravi						5,000
	(The first bill dishonoured)

Mar.16	Interest A/c				Dr.				50
				To Ravi						50
	(Interest charged at 12% p.a. on the first bill for one month)

Mar.19	Ravi						Dr.		5,050
				To Cash A/c						5,050
	(Cash paid to Ravi for amount due on account of dishounor of the first bill along with interest at 12% p.a. for one month)

Mar.28	Bills Payable A/c						Dr.		10,000
				To Ravi						10,000
	(The second bill dishonoured)

Mar.28	Interest A/c						Dr.		132
				To Ravi						132
	(Interest charged at 12% p.a. for 40 days on the second bill)

Apr.01	Ravi				Dr.				10,132
		To Cash A/c								10,132
	(Cash paid to Ravi for amount due on account of dishounor of the second bill along with interest at 12% p.a. for 40 days)

May 16	Bills Payable A/c				Dr.				12,000
				To Ravi						12,000
	(The third bill dishonoured)

Mar.16	Interest A/c				Dr.				360
				To Ravi						360
	(Interest charged at 12% p.a. for 3 months on third bill)

May 19	Ravi					Dr.			12,360
				To Cash A/c						12,360
	(Cash paid to Ravi for amount due on account of dishounor of the third bill along with interest at 12% p.a. for 3 months)

Books of Mustaq Journal
Date		Particulars		L.F	Debit Amount Rs	Credit Amount Rs
2011
Feb.13	Bills Receivable A/c		Dr.		10,000
	Discount Allowed A/c		Dr.		200
		To Ravi				10,200
	(Bills Receivable received from Ravi and allowed discount)

Mar.28	Ravi		Dr.		10,200
		To Bills Receivable A/c				10,000
		To Discount Received				200
	(Bill dishonoured)

Books of Bank Journal
Date		Particulars		L.F	Debit Amount Rs	Credit Amount Rs
2011
Mar.03	Bills Receivable A/c		Dr.		13,000
		To Bills for Collection A/c				13,000
	(Bill received from Ravi for collection)

Mar.07	Bills for Collection A/c		Dr.		13,000
		To Bills Receivable A/c				13,000
	(Bill dishonoured)

Q11 : On Jan 01, 2006 Neha sold goods for Rs 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.
Answer:

Books of Neha Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Muskan		Dr.		20,000
		To Sales A/c				20,000
	(Goods sold to Muskan)

Jan.01	Bills Receivable A/c		Dr.		20,000
		To Muskan				20,000
	(Muskan’s acceptance received)

Feb.04	Cash A/c		Dr.		19,800
	Rebate on bill A/c		Dr.		200
		To Bills Receivable A/c				20,000
	(Muskanâ€™s acceptance retired one month before maturity and allowed rebate at 12% p.a.)

Books of Muskan Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Purchases A/c				Dr.		20,000
				To Neha				20,000
	(Goods bought from Neha)

Jan.01	Neha				Dr.		20,000
				To Bills Payable A/c				20,000
	(Bill drawn by Neha payable after 2 months accepted)

Feb.04	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 received rebate at 12% p.a.)

Q12 : On Jan 15, 2006 Raghu sold goods worth Rs 35,000 to Devendra and drew up to the latter three bills of exchanges. The first bill was for Rs 5,000 payable after one month, the second bill was for Rs 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 Rs 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 Rs 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 Rs 200 as noting charges. Five days after the dishonour of the bill Devendra paid the entire amount due to Raghu along with interest Rs 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.
Answer:

Books of Raghu Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Devendra		Dr.			35,000
		To Sales A/c					35,000
	(Goods sold to Devendra)

Jan.15	Bills Receivable A/c		Dr.			35,000
		To Devendra					35,000
	(Three bills received from Devendra the first bill Rs 5,000, the second bill Rs 20,000, the third bill Rs 10,000)

Jan.15	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 settlement of amount due to him)

Jan.15	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.)

Apr.18	Devendra			Dr.		20,030
		To Bank A/c					20,030
	(The second bill dishonoured and bank paid Rs 30 for noting charges)


May14	Bill Sent for Collection A/c		Dr.			10,000
		To Bills Receivable A/c					10,000
	(The third bill sent to bank for collection)

May18	Davendra		Dr.			10,200
		To Bill sent for collection A/c					10,000
		To Bank A/c					200
	(The third bill dishonoured and bank paid Rs 200 as noting charges)

May23	Davendra		Dr.			1,000
		To Interest A/c					1,000
	(Interest due to Devendra on account of bills dishonoured)

May23	Cash A/c		Dr.			31,230
		To Davendra					31,230
	(Cash received from Davendra)

Ledger Davendra’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Jan.15	Sales		35,000	Jan.15	Bills Receivable		35,000
Apr.18	Bank		20,030	May23	Cash		31,230
May18	Bills Sent for Collection		10,000
May18	Bank		200
May23	Interest		1,000
			66,230				66,230

Books of Davendra Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Purchases A/c		Dr.			35,000
		To Raghu					35,000
	(Goods bought from Raghu)

Jan.15	Raghu		Dr.			35,000
		To Bills Payable A/c					35,000
	(Three bills drawn by Raghu accepted: the first bill for Rs 5,000 payable after one month, the second for Rs 20,000 payable after 3 months and the third for Rs 10,000 payable after 4 months)

Feb.18	Bills Payable A/c			Dr.		5,000
		To Cash					5,000
	(The first bill discharged on the due date)

Apr.18	Bills Payable A/c			Dr.		20,000
	Noting Charges A/c			Dr.		30
		To Raghu					20,030
	(The second bill dishonoured and Noting Charges Rs 30)

May18	Bills Payable A/c			Dr.		10,000
	Noting Charges A/c			Dr.		200
		To Raghu					10,200
	(The third bill dishonoured and Noting Charges Rs 200)

May23	Interest A/c			Dr.		1,000
		To Raghu					1,000
	(Interest charged Rs 1,000 on account of bills dishonoured)

May23	Cash A/c			Dr.		31,230
		To Bank Loan A/c					31,230
	(Bank loan taken for settling Raghu’s account)

May23	Raghu			Dr.		31,230
		To Cash A/c					31,230
	(Cash paid to Raghu)

Ledger Raghu’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Jan.15	Bills Payable		35,000	Jan.15	Purchases		35,000
May23	Cash		31,230	Apr.18	Bills Payable		20,000
				Apr.18	Noting Charges		30
				May18	Bills Payable		10,000
				May18	Noting Charges		200
				May18	Interest		1,000
			66,230				66,230

Books of Dewan Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	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 and allowed him discount of Rs 200)

Feb.18	Cash A/c				Dr.		5,000
		To Bills Receivable A/c						5,000
	(Bill met on maturity)

Q13 : Vimal purchased goods Rs 25,000 from Kamal on Jan 15, 2006 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.
Answer:
Case (i) : The bill was retained by Kamal till the date of its maturity

Books of Kamal Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Vimal		Dr.		25,000
		To Sales A/c				25,000
	(Goods sold to Vimal)

Jan.15	Bills Receivable A/c		Dr.		25,000
		To Vimal				25,000
	(Vimal’s acceptance reccived)

Mar.18	Vimal		Dr.		25,000
		To Bills Receivable A/c				25,000
	(Vimal acceptance dishonoured)

Books of Vimal Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Purchases A/c			Dr.		25,000
			To Kamal				25,000
	(Goods bought from Kamal)

Jan.15	Kamal			Dr.		25,000
		To Bills Payable A/c					25,000
	(Bill drawn by Kamal accepted)

Mar.18	Bills Payable A/c			Dr.		25,000
		To Kamal					25,000
	(Bill drawn by Kamal dishonoured)

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

Books of Kamal Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Vimal		Dr.		25,000
		To Sales A/c				25,000
	(Goods sold to Vimal)

Jan.15	Bills Receivable A/c		Dr.		25,000
		To Vimal				25,000
	(Vimal’s acceptance received)

Jan.15	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. with bank)

Mar.18	Vimal		Dr.		25,000
		To Bank A/c				25,000
	(Vimal’s aceptance dishonoured)

Books of Vimal Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Purchases A/c			Dr.		25,000
			To Kamal				25,000
	(Goods bought from Kamal)

Jan.15	Kamal			Dr.		25,000
		To Bills Payable A/c					25,000
	(Bill drawn by Kamal accepted)

Mar.18	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 Kamal Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

2011
Jan.15	Vimal		Dr.		25,000
		To Sales A/c				25,000
	(Goods sold to Vimal)

Jan.15	Bills Receivable A/c		Dr.		25,000
		To Vimal				25,000
	(Vimal’s acceptence received)

Jan.15	Sharad		Dr.		25,000
		To Bills Receivable A/c				25,000
	(Vimal’s acceptance endorsed to Sharad)

Mar.18	Vimal		Dr.		25,000
		To Sharad				25,000
	(Vimal’s acceptance endorsed to Kamal dishonoured)

Books of Vimal Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Purchases A/c			Dr.		25,000
			To Kamal				25,000
	(Goods bought from Kamal)

Jan.15	Kamal			Dr.		25,000
		To Bills Payable A/c					25,000
	(Bill drawn by Kamal accepted)

Mar.18	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 Kamal Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.15	Vimal		Dr.		25,000
		To Sales A/c				25,000
	(Goods sold to Vimal)

Jan.15	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)

Mar.18	Vimal		Dr.		25,000
		To Bill Sent for Collection				25,000
	(Vimal’s acceptance dishonoured)

Books of Vimal Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
Case (iii)
2011
Jan.15	Purchases A/c			Dr.		25,000
			To Kamal				25,000
	(Goods bought from Kamal)

Jan.15	Kamal			Dr.		25,000
		To Bills Payable A/c					25,000
	(Bill drawn by Kamal accepted)

Mar.18	Bills Payable A/c			Dr.		25,000
		To Kamal					25,000
	(Bill drawn by Kamal dishonoured)

Q14 : Abdula sold goods to Tahir on Jan 17, 2006 for Rs 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 Rs 40 as noting charges. Five days after the dishonour of his acceptance Tahir settled his debt by making a payment of Rs 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.
Answer:

Books of Abdula Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.17	Tahir			Dr.		18,000
			To Sales A/c				18,000
	(Goods sold to Tahir)

Jan.17	Bills Receivable A/c			Dr.		18,000
		To Tahir					18,000
	(Tahir’s acceptance received)

Mar.06	Tahir			Dr.		18,040
		To Bills Receivable A/c					18,000
		To Cash					40
	(Tahir’s acceptance dishonoured and Rs 40 paid as noting charges)

Mar.06	Tahir			Dr.		660
		To Interest A/c					660
	(Interest charged from Tahir on account of bill dishonoured)

Mar.12	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 Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Jan.17	Sales		18,000	Jan.17	Bills Receivable		18,000
Mar.06	Bills Receivable		18,000	Mar.11	Cash		18,700
Mar.06	Cash		40
Mar.06	Interest		660
			36,700				36,700

Books of Tahir Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.17	Purchases A/c		Dr.		18,000
		To Abdula				18,000
	(Goods bought from Abdula)

Jan.17	Abdula		Dr.		18,000
		To Bills Payable A/c				18,000
	(Bill drawn by Abdula accepted, payable after 15 days)

Mar.06	Bills Payable A/c		Dr.		18,000
	Noting Charges A/c		Dr.		40
		To Abdula				18,040
	(Abulaâ€™s bill dishonoured)

Mar.07	Interest A/c		Dr.		660
		To Abdula				660
	(Interest charged on account of bill dishonoured)

Mar.11	Abdula		Dr.		18,700
		To Cash A/c				18,700
	(Cash paid to Abdula)

Ledger Abdula’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Jan.17	Bills Payable		18,000	Jan.17	Purchases		18,000
Mar.11	Cash		18,700	Mar.06	Bills Payable		18,000
				Mar.06	Noting Charges		40
				Mar.06	Interest		660
			36,700				36,700

Q15 : Asha sold goods worth Rs 19,000 to Nisha on March 02, 2006. Rs 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 Rs 30 as noting charges.
Record the necessary journal entries in the books of Asha and Nisha.
Answer :

Books of Asha Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Mar.02	Nisha			Dr.		19,000
		To Sales A/c					19,000
	(Goods sold to Nisha)

Mar.02	Cash A/c			Dr.		4,000
	Bills Receivable A/c			Dr.		15,000
			To Nisha				19,000
	(Cash and Nisha’s acceptance received)

Mar.02	Bank A/c			Dr.		14,635
	Discount A/c			Dr.		375
			To Bills Receivable A/c				15,000
	(Nisha’s aceptance 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).

June.05	Nisha			Dr.		15,030
			To Bank A/c				15,030
	(Nisha’s acceptance dishonoured and bank paid Rs 30 as noting charges)

Books of Nisha Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Mar.02	Purchases A/c				Dr.		19,000
			To Asha					19,000
	(Goods bought from Asha)

Mar.02	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 Rs 4,000 paid in cash)

Jun.05	Bills Payable A/c			Dr.			15,000
	Noting Charges A/c			Dr.			30
		To Asha						15,030
	(Ashaâ€™s bill dishonoured)

Q16 : On Feb. 02, 2006, Verma purchased from Sharma goods for Rs 17,500. Verma paid Rs 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 Rs 15,400. On the due date of the bill Gupta presented the bill to Verma which the latter dishonoured and Gupta paid Rs 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 Rs 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.
Answer :

Books of Sharma Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.02	Verma			Dr.			17,500
			To Sales A/c					17,500
	(Goods sold to Verma)

Feb.02	Cash A/c			Dr.			2,500
	Bills Receivable A/c			Dr.			15,000
			To Verma					17,500
	(Cash Rs 2,500 and Promissory Note Rs 15,000 received from Verma for 60 days)

Feb.02	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 settlement of amount due to him)

Apr.05	Discount Received A/c				Dr.		400
	Verma				Dr.		15,050
			To Gupta					15,450
	(Promissory Note issued by Verma dishonoured and Gupta paid Rs 50 as noting charges)
	*Note*: In this question Rs 5,000 is given as noting charges, there is mistake. Here Rs 50 has been taken as noting charges instead of Rs 5,000).

Apr.06	Interest A/c				Dr.		50
			To Gupta					50
	(Interest of Rs 50 debited to Gupta, on account of dishonour of Promissory Note)

Apr.06	Gupta				Dr.		15,500
			To Bank A/c					15,500
	(Gupta’s A/c settled)

Apr.06	Bank A/c				Dr.		15,050
			To Verma					15,050
	(Cheque received from Verma for the amount due from him)

Ledger Verma’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.02	Sales		17,500	Feb.02	Cash		2,500
Apr.06	Gupta		15,050	Feb.02	Bills Receivable		15,000
				Apr.06	Bank		15,050
			32,550				32,550

Gupta’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.02	B/R		15,000	Apr.01	Balance b/d		15,400
Feb.02	Discount Received		400	Apr.06	Verma		15,050
Feb.02	Bank		15,500	Apr.06	Discount Reserved		400
				Apr.06	Interest		50

			30,900				30,900

Books of Verma Journal
Date		Particulars					L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.02	Purchases A/c			Dr.				17,500
			To Sharma						17,500
	(Goods bought from Sharma)

Feb.02	Sharma					Dr.		17,500
		To Bills Payable A/c							15,000
		To Cash A/c							2,500
	(Cash Rs 2,500 paid and Promissory Note made for the balance)

Apr.06	Bills Payable A/c					Dr.		15,000
	Noting Charges A/c					Dr.		50
		To Sharma							15,050
	(Promissory Note dishonoured on maturity)

Apr.06	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 Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.02	Cash		2,500	Feb.02	Purchases		17,500
Feb.02	Bills Payable		15,000	Apr.06	Bills Payable		15,000
Apr.06	Bank		50	Apr.06	Noting Charges		50

			30,900				30,900

Books of Gupta Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.02	Bills Receivable A/c			Dr.			15,000
	Discount Allowed A/c			Dr.			400
			To Sharma					15,400
	(Promissory Note Rs 15,000 received from Sharma in full settlement for 60 days)

Apr.06	Sharma				Dr.		15,450
		To Bills Receivable A/c						15,000
		To Discount Allowed A/c						400
		To Bank A/c						50
	(Promissory Note received from Sharma, dishonoured)

Apr.06	Sharma				Dr.		50
		To Interest A/c						50
	(Interest Rs 50 credited on account of Promissory Note dishonoured)

Apr.06	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 Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.01	Balance b/d		15,400	Feb.02	Bills Receivable		15,000
Apr.06	Bills Receivable		15,000	Feb.02	Discount Allowed		400
Apr.06	Discount Allowed		4,000	Apr.06	Bank		15,500
Apr.06	Bank		50
Apr.06	Interest		50
			30,900				30,900

Q17 : Lilly sold goods to Mathew on 1.3.2006 for Rs 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 Rs 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.
Answer :

Books of Lilly Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Mar.01	Mathew			Dr.			12,000
			To Sales A/c					12,000
	(Goods sold to Mathew)

Mar.01	Bills Receivable A/c			Dr.			12,000
			To Mathew					12,000
	(Mathew’s acceptance payable after two months received)

Mar.01	Bank A/c			Dr.			11,820
	Discount A/c			Dr.			180
			To Bills Receivable A/c					12,000
	(Mathewâ€™s bill discounted at 9% p.a.)

May 03	Mathew A/c				Dr.		12,045
			To Bank A/c					12,045
	(Mathew’s acceptance dishonoured bank paid Rs 45 as noting charges)
	*Note*: In this question, May 04 has been considered as Holiday, so the date of maturity will be May 03, 2006 in place of May 04, 2006.

May 08	Mathew				Dr.		241
			To Interest A/c					241
	(Interest @ 12% credited to Mathew on account of bill dishonoured)

May 08	Bank A/c				Dr.		12,286
			To Mathew					12,286
	(Cheque received from Mathew for the amount due from him)

Ledger Mathew’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Mar.01	Sales		12,000	Mar.01	Bills Receivable		12,000
May03	Bank		12,045	May08	Bank		12,286
May08	Interest		241
			24,286				24,286

Books of Mathew Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Mar.01	Purchases A/c		Dr.		12,000
		To Lilly				12,000
	(Goods bought from Lilly)

Mar.01	Lilly		Dr.		12,000
		To Bills Payable A/c				12,000
	(Lilly’s acceptance payable after two months accepted)

May 03	Bills Payable A/c		Dr.		12,000
	Noting Charges A/c		Dr.		45
		To Lilly				12,045
	(Bill drawn by Lilly dishonoured)

May 08	Interest A/c		Dr.		241
		To Lilly				241
	(Interest charged @ 12% from Lilly on account of bill dishonoured)

May 08	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 Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Mar.01	Bills Payable		12,000	Mar.01	Purchases		12,000
May 09	Bank		12,286	May 03	Bills Payable		12,000
				May 03	Noting charges		45
				May 08	Interest		241
			24,286				24,286

Note : In this question, there is a contradiction. As per the discounting ruleâ€“Bank is regarded as the holder of the bill. It is the bank who presents the bill for payment and also pays the noting charges on behalf of the drawer (Lilly). However, as per the question, Lilly, who is presenting, discounting the bill and also paying the noting charges. Thus, in the solution, we have assumed that it is bank and not Lilly who presents, discounts and pays the noting charges in case of dishonour of bill.

Q18 : Kapil purchased goods for Rs 21,000 from Gaurav on 1.2.2006 and accepted a bill of exchange drawn by Gaurav for the same amount. The bill was payable after one month. On 25.2.2002 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 Rs 100 as noting charges. Record the necessary journal entries for the above transactions in the books of Kapil and Gourav.
There is a misprint of the date in this question.
Answer :

Books of Gaurav Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Kapil		Dr.		21,000
		To Sales A/c				21,000
	(Goods sold to Kapil)

Feb.01	Bills Receivable A/c		Dr.		21,000
		To Kapil				21,000
	(Kapil’s acceptance received)

Feb.25	Bills Sent for Collection A/c		Dr.		21,000
		To Bills Receivable A/c				21,000
	(Bill Receivable sent to bank for collection)

Mar.04	Kapil		Dr.		21,100
		To Bill Sent for Collection A/c				21,000
		To Bank A/c				100
	(Kapil’s acceptance dishonoured)

Books of Kapil Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.01	Purchases A/c			Dr.		21,000
			To Gaurav				21,000
	(Goods bought from Gaurav)

Feb.01	Gaurav			Dr.		21,000
			To Bills Payable A/c				21,000
	(Bill drawn by Gaurav payable after one month accepted)

Mar.04	Bills Payable A/c			Dr.		21,000
	Noting Charges A/c			Dr.		100
			To Gaurav				21,100
	(Bill drawn by Kapil dishonoured)

Q19 : On Feb. 14, 2006 Rashmi sold good Rs 7,500 to Alka. Alka paid Rs 500 in cash and for the bank balance accepted a bill of exchange drawn upon her by Rashmi payable after two months. On Apr.10, 2006 Alka approached Rashmi to cancel the bill since she was short of funds. She further requested Rashmi to accept Rs 2,000 in cash and draw a new bill for the balance including interest Rs 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.
Answer :

Books of Rashmi Journal
Date				Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.14	Alka				Dr.			7,500
			To Sales A/c						7,500
	(Goods sold to Alka)

Feb.14	Cash A/c				Dr.			500
	Bills Receivable A/c				Dr.			7,000
			To Alka						7,500
	(Cash received Rs 500 and the bill accepted by Alka)

Apr.10	Alka					Dr.		7,000
			To Bills Receivable A/c						7,000
	(Alka got the bill cancelled)

Apr.10	Cash A/c					Dr.		2,000
		To Alka							2,000
	(Received cash from Alka)

Apr.10	Alka					Dr.		500
			To Interest A/c						500
	(Interest charged on the amount due from Alka)

Apr.10	Bills Receivable A/c					Dr.		5,500
			To Alka						5,500
	(Alka’s acceptance payable of two months received)

June 13	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 Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.14	Sales		7,500	Feb.14	Cash		500
Apr.10	Bills Receivable		7,000	Feb.14	Bills Receivable		7,000
Apr.10	Interest		500	Apr.10	Cash		2,000
				Apr.10	Bills Receivable		5,500
			15,000				15,000

Books of Alka Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2011
Feb.14	Purchases A/c		Dr.			7,500
		To Rashmi					7,500
	(Goods bought from Rahsmi)

Feb.14	Rashmi		Dr.			7,500
		To Cash A/c					500
		To Bills Payable A/c					7,000
	(Cash paid to Rashmi Rs 500 and a bill for Rs 7,000 drawn by Rashmi accepted)

Apr.10	Bills Payable A/c			Dr.		7,000
		To Rashmi					7,000
	(Bill cancelled before maturity)

Apr.10	Rashmi			Dr.		2,000
		To Cash A/c					2,000
	(Cash paid to Rashmi)

Apr.10	Interest A/c			Dr.		500
		To Rashmi					500
	(Interest due to Rashmi)

Apr.10	Rashmi			Dr.		5,500
		To Bills Payable A/c					5,500
	(Rashmi’s acceptance payable after two months accepted)

June.13	Bills Payable A/c			Dr.		5,500
		To Cash A/c					5,500
	(The bill met on due date)

Ledger Rashmi’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Feb.14	Cash		500	Feb.14	Purchases		7,500
Feb.14	Bills Payable		7,000	Apr.10	Bills Payable		7,000
Apr.10	Cash		2,000	Apr.10	Interest		500
Apr.10	Bills Payable		5,500

			15,000				15,000

Q20 : Nikhil sold goods for Rs 23,000 to Akhil on Dec. 01, 2005. 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 Rs 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 Rs 10,000 in cash immediately and drew a third bill upon him including interest of Rs 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.
Answer :

Books of Nikhil Journal
Date			Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2010
Dec.01	Akhil					Dr.		23,000
		To Sales A/c							23,000
	(Goods sold to Akhil)

Dec.01	Bills Receivable A/c					Dr.		23,000
		To Akhil							23,000
	(Akhil’s acceptance received)

Dec.01	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)

2011
Feb.04	Akhil					Dr.		23,100
		To Bank A/c							23,100
	(Akhil’s acceptance dishonoured, bank paid Rs 100 as noting charges)

Feb.04	Akhil			Dr.				385
		To Interest A/c							385
	(Interest credited on account of bill dishonoured at 10% p.a. for two months)

Feb.04	Bills Receivable A/c				Dr.			23,485
		To Akhil							23,485
	(New acceptance received from Akhil for next two months received)

Apr.01	Akhil				Dr.			23,485
		To Bills Receivable A/c							23,485
	(The second bill cancelled one week before maturity)

Apr.01	Cash A/c				Dr.			10,000
		To Akhil							10,000
	(Cash received from Akhil)

Apr.01	Akhil				Dr.			500
		To Interest A/c							500
	(Interest due from Akhil for the bill)

Apr.01	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’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2010				2010
Dec.01	Sales		23,000	Dec.01	Bills Receivable		23,000
2011				2011
Feb.04	Bank		23,100	Feb.04	Bills Receivable		23,485
Feb.04	Interest		385	Apr.01	Cash		10,000
Apr.01	Bills Receivable		23,485	Apr.01	Bills Receivable		13,985
Apr.01	Interest		500
			70,470				70,470

Books of Akhil Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
Dec.01	Purchases A/c			Dr.		23,000
		To Nikhil					23,000
	(Goods bought from Nikhil)

Dec.01	Nikhil			Dr.		23,000
		To Bills Payable A/c					23,000
	(Bill drawn by Nikhil payable after two months accepted)

2011
Feb.04	Bills Payable A/c			Dr.		23,000
	Noting Charges A/c			Dr.		100
		To Nikhil					23,100
	(Bill dishonoured on due date and Rs 100 paid by the holder of bill)

Feb.04	Interest A/c			Dr.		385
		To Nikhil A/c					385
	(Interest due to Nikhil for the bill dishonoured)

Feb.04	Nikhil			Dr.		23,485
		To Bills Payable A/c					23,485
	(New bill accepted payable after two months)

Apr.01	Bills Payable A/c			Dr.		23,485
		To Nikhil					23,485
	(Bill cancelled before maturity)

Apr.01	Nikhil			Dr.		10,000
		To Cash A/c					10,000
	(Cash paid to Nikhil)

Apr.01	Interest A/c			Dr.		500
		To Nikhil					500
	(Interest due to Nikhil for bill cancellation)

Apr.01	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 Rs	Date	Particulars	J.F.	Amount Rs
2010				2010
Dec.01	Bills Payable		23,000	Dec.01	Purchases		23,000
2011				2011
Feb.04	Bills Payable		23,485	Feb.04	Bills Payable		23,000
Apr.01	Cash		10,000	Feb.04	Noting Charge		100
Apr.01	Bills Payable		13,985	Feb.04	Interest		385
				Apr.01	Bills Payable		23,485
				Apr.01	Interest		500
			70,470				70,470

Q21 : On Jan 01, 2006 Vibha sold goods worth Rs 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 Rs 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.
Answer :

Books of Vibha Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Sudha		Dr.		18,000
		To Sales A/c				18,000
	(Goods sold to Sudha)

Jan.01	Bills Receivable A/c		Dr.		18,000
		To Sudha				18,000
	(Sudha’s acceptance received)

Jan.01	Geeta		Dr.		18,000
		To Bills Receivable A/c				18,000
	(Sudha’s acceptance endorsed in favour of Geeta)

Feb.27	Sudha		Dr.		18,000
		To Geeta				18,000
	(Sudha cancelled the bill five days before the maturity)

Feb.27	Geeta		Dr.		18,000
		To Cash A/c				18,000
	(Cash paid to Geeta)

Feb.27	Sudha				200
		To Interest A/c				200
	(Interest credited to Sudha on account of cancelling the bill )

Feb.27	Bills Receivable A/c		Dr.		18,200
		To Sudha				18,200
	(New bill received from Sudha)

Mar.02	Cash A/c		Dr.		18,200
		To Sudha				18,200
	(Shudhaâ€™s acceptance met on due date)

Q22 : Following was the position of debtor and creditor of Gautam as on 1.1.2006.

	Debtors	Creditors
	Rs	Rs
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 2006:

Jan. 02	Drew on Babu at two months after date at full settlement for Rs 4,800. Babu accepted the bill and returned it on 5.1.2006.
Jan. 04	Babu‘s bill discounted for Rs 4,750.
Jan. 08	Chanderkala sent a promissory note for Rs 8,000 payable three months after date.
Jan. 10	Promissory note received from Chanderkala discounted for Rs 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 Rs 2,000 in cash and a promissory note for the balance payable after three months. Record the above transactions in the proper subsidiary books.

Answer:

Bills Receivable Book

No.

Date of Bill

2011

Date Received

2006

From whom

of Bill

Drawer

whom

received

Acceptor

Where

Term

Payable

Due date

2011

L.F.

Amount

Cash

Book

Folio

Remarks

Jan.02

Jan.05

Babu

Self

Babu

2 months

Mar.05

4,800

Total

4,800

Bills Payable Book

No.

Date of Bill

2011

To Whom

Given

Drawer

Payee

Where

payable

Term

Due date

2011

Ledger

Amount

Date

paid

Cash

Book

Folio

Remarks

Jan.12

Sheiba

2 months

Mar.15

12,000

Jan.25

Anju

2 months

Apr.28

5,000

Total

17,000

Cash Book
Dr.									Cr.
Date	Particulars	L.F.	Cash Rs	Bank Rs	Date	Particulars	L.F.	Cash Rs	Bank Rs
2011					2011
Jan.04	Bills Receivable			4,750
Jan.10	Bills Receivable			7,900
Jan.29	Kiran		2,000		Jan.31	Balance c/d		2,000	12,650

			2,000	12,650				2,000	12,650

There is difference between Bills of Exchange and Promissory Note. In case of Promissory Note, parties are makers and payees. However, in Bills of Exchange parties are Drawer, drawee (acceptor) and payee on account difference Promissory Note has not been recorded in Bills Receivable and Bills Payable book.

Books of Gautam Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.05	Discount Allowed A/c			Dr.			200
			To Babu					200
	(Babu’s acceptance received and allowed him discount Rs 200)

Jan.04	Discount A/c				Dr.		50
		To Bills Receivable A/c						50
	(Babu’s acceptance discounted with a discount charge of Rs 50)

Jan.08	Bills Receivable A/c				Dr.		8,000
		To Chanderkala						8,000
	(Promissory Note from Chanderkala received)

Jan.10	Discount A/c			Dr.			100
		To Bills Receivable A/c						100
	(Chanderkala’s Promissory Note discounted with bank at discount of Rs 100)

Jan.22	Bills Receivable A/c			Dr.			14,000
		To Anita						14,000
	(Promissory Note received from Anita)

Jan.23	Manju				Dr.		14,000
		To Bills Receivable A/c						14,000
	(Anita’s Promissory Note endorsed to Manju)

Jan.29	Bills Receivable A/c				Dr.		11,500
		To Kiran						11,500
	(Promissory Note from Kiran received)

Q23 : On Jan. 01, 2006 Harsh accepted a month bill for Rs 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.
Answer :

Books of Tanu Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Bills Receivable A/c		Dr.		10,000
		To Harsh				10,000
	(Harsh’s acceptance received)

Jan.01	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)

Feb.04	Harsha		Dr.		10,000
		To Bank A/c				10,000
	(Harsh’s account settled by paying amount due to Harsh through cheque)

Books of Harsh Journal
Date				Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Tanu				Dr.		10,000
			To Bills Payable A/c					10,000
	(Bill drawn by Tanu accepted)

Feb.04	Bank A/c				Dr.		10,000
		To Tanu						10,000
	(Cheque received from Tanu)

Feb.04	Bills Payable A/c				Dr.		10,000
		To Bank A/c						10,000
	(Bill drawn by Tanu met on due date)

Q24 : Ritesh and Naina were in need of funds temporarily. On August 01 2005 Ritesh drew upon Naina a bill for Rs 12,000 for 4 months. Naina accepted the bill and returned to Ritesh. Ritesh discounted the Bill @ 8% p.a. Half amount of the discounted bill remitted to Naina. On due date, Ritesh sent the required sum to Naina, who met the bill. Journalise the transaction in the books of both the parties.
Answer :

Books of Ritesh Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
Aug.01	Bills Receivable A/c		Dr.		12,000
		To Naina				12,000
	(Naina’s acceptance received)

Aug.01	Bank A/c		Dr.		11,680
	Discount A/c		Dr.		320
		To Bills Receivable A/c				12,000
	(Naina’s acceptance discounted at 8% p.a. with bank)

Aug.01	Naina		Dr.		6,000
		To Cash A/c				5,840
		To Discount A/c				160
	(Bill discounted with bank for four months at 8% p.a.)

Dec.04	Naina		Dr.		6,000
		To Cash A/c				6,000
	(Balance amount paid to Naina, in order to met the bill)

Books of Naina Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
Aug.01	Ritesh		Dr.		12,000
		To Bills Payable A/c				12,000
	(Bill payable after four months accepted by Harish)

Aug.01	Cash A/c		Dr.		5,840
	Discount A/c		Dr.		160
		To Ritesh				6,000
	(Half amount of the discounted bill received from Ritesh)

Dec.04	Cash A/c		Dr.		6,000
		To Ritesh				6,000
	(Balance amount received from Ritesh)

Dec.04	Bills Payable A/c		Dr.		12,000
		To Bank A/c				12,000
	(Bill paid on maturity)

Q25 : On Jan. 01, 2006, Bhanu and Naman drew on each other a bill for Rs 8,000 payable 3 months after the due date for their Mutual benefit. On January 02 they discounted with their bank each other’s bill at 5% p.a. on the due date each met his own acceptance. Give journal entry in the books of Bhanu and Naman.
Answer :

Books of Bhanu Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Bills Receivable A/c				Dr.		8,000
		To Naman						8,000
	(Received Naman’s acceptance for mutual help)

Jan.01	Naman			Dr.			8,000
		To Bills Payable A/c						8,000
	(Naman’s acceptance accepted, payable after 3 months for mutual help)

Jan.01	Bank A/c		Dr.				7,900
	Discount A/c		Dr.				100
		To Bills Receivable A/c						8,000
	(Naman’s acceptance discounted at 5% p.a. with bank for three months)

Apr.04	Bills Payable A/c		Dr.				8,000
		To Bank A/c						8,000
	(Naman’s acceptance cleared)

Books of Naman Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Jan.01	Bills Receivable A/c		Dr.		8,000
		To Bhanu				8,000
	(Bhanu’s acceptance received for mutual help)

Jan.01	Bhanu		Dr.		8,000
		To Bills Payable A/c				8,000
	(Bill drawn by Bhanu payable after 3 months accepted for mutual help)

Jan.01	Bank A/c		Dr.		7,900
	Discount A/c		Dr.		100
		To Bills Receivable A/c				8,000
	(Bhanu’s acceptance discounted at 8% p.a. for three months with bank)

Apr.04	Bills Payable A/c		Dr.		8,000
		To Bank A/c				8,000
	(Bill drawn by Bhanu discharged on due date)

Q26 : On Nov. 01, 2005 Sonia drawn a bill on sunny for Rs 15,000 for 3 months for mutual accommodation. Sunny accepts the bill and return it to sonia. Sonia discounted the same with his bankers @ 6% p.a. The proceeds are shared between sonia and sunny in proportion of 2/3rd, 1/3rd respectively. On the due date sonia remits his proportion to sunny who fails to met the bill and as a result sonia has to meet it. Sunny Give a fresh acceptance for the amount due to sonia plus interest of Rs 100 sunny meet his second acceptance on due date. Record the necessary journal entries in the books of sonia and sunny.
Answer:

Books of Sonia Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2010
Nov.01	Bills Receivable A/c				Dr.		15,000
			To Sunny					15,000
	(Sunny’s acceptance received)

Nov.01	Bank A/c				Dr.		14,775
	Discount A/c				Dr.		225
		To Bills Receivable A/c						15,000
	(Bill discounted with banker at 6% p.a. for 3 months)

Nov.01	Sunny			Dr.			5,000
		To Cash A/c						4,925
		To Discount A/c						75
	(1/3^rd amount of discounted bill remitted to Sunny)

2011
Feb.04	Sunny			Dr.			10,000
		To Cash A/c						10,000
	(Balance amount bill remitted to Sunny)

Feb.04	Sunny			Dr.			15,000
		To Bank A/c						15,000
	(Bill discounted with bank dishonoured)

Feb.04	Bank A/c			Dr.			15,000
		To Cash A/c						15,000
	(Cash paid to bank on account of dishonour of bill)

Feb.04	Sunny			Dr.			100
		To Interest A/c						100
	(Interest due from Sunny on account of dishounor of bill)

Feb.04	Bills Receivable A/c			Dr.			15,100
		To Sunny						15,100
	(Fresh acceptance received from Sunny)

	Cash A/c			Dr.			15,100
		To Bills Receivable A/c						15,100
	(Cash received on due date)

Note: In the question, the maturity date of the second bill is not mentioned; so, the date of honouring the bill has not been shown.

Books of Sunny Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2010
Nov.01	Sonia			Dr.		15,000
			To Bills Payable A/c				15,000
	(Bill accepted payable after three months drawn by Sonia)

Nov.01	Cash A/c			Dr.		4,925
	Discount A/c			Dr.		75
		To Sonia A/c					5,000
	(1/3^rd amount of the discounted bill received from Sonia)

2011
Feb.04	Cash A/c			Dr.		10,000
		To Sonia					10,000
	(Balance amount of bill due from Sonia received)

Feb.04	Bills Payable A/c			Dr.		15,000
		To Sonia					15,000
	(Bill drawn by Sonia dishonoured on due date)

Feb.04	Interest A/c			Dr.		100
		To Sonia					100
	(Interest due to Sonia)

Feb.04	Sonia			Dr.		15,100
		To Bills Payable A/c					15,100
	(The second bill accepted)

	Bills Payable A/c			Dr.		15,100
		To Cash A/c					15,100
	(Sonia’s acceptance met on due date)