NCERT Solutions Class 11 Accountancy Chapter 8

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

Ans.

Commonly used negotiable instruments are:

• Cheque.
• Bill of exchange.

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

Ans.

Basis	Bill of Exchange	Promissory Note
Drawer	It is drawn by the creditors	It is drawn by the debtor
Order or promise and parties	It contains an order to make payment. There can be three parties to it, viz, the drawer, the drawee and the payee.	It contains a promise to make payment. There are only two parties to it, viz, the drawer and the payee.

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

Ans.

Features of bill of exchange:

• A bill of exchange must be in writing.
• It is an order to make payment.
• It is drawn and signed by the maker, i.e., drawer of the bill.
• It is an unconditional order to a person, i.e., drawee to pay the specified amount. The drawee must accept it to make it a valuable document.
• The date on which payment is made must also be certain.

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

Ans.

There are three parties to a bill of exchange:

Drawer: Drawer is the maker of the bill of exchange. A seller/creditor that is entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor.

Drawee: Drawee is the person on whom bill of exchange is drawn. Drawee is the purchaser or debtor of the goods upon whom the bill of exchange is drawn.

Payee: payee is the person to whom the payment is to be made. Payee may be the drawer himself or a third person.

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

Ans.

Maturity of a bill of exchange refers to the date on which the instrument becomes due for payment.

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

Ans.

Dishonour of bill of exchange means that the acceptance is not paid on maturity. It means the drawee fails to make the payment on the date of maturity.

Q.7 Name the parties to a promissory note.

Ans.

There are two parties to a promissory note.

Maker of Drawer: Maker or Drawer is the person who makes or draws the promissory note to pay a certain amount as specified in the promissory note. He/she is also called the promise.

Drawee or payee: Drawee or Payee is the person in whose favour the promissory note is drawn. Also called Promise.

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

Ans.

Acceptance of a bill of exchange refers to the drawee accepts the bill prepared by the drawer. He/she acknowledges the payment of debt.

Q.9 What is noting of a bill of exchange?

Ans.

Noting of a bill means getting the bill notified and protested on its dishonour with the Notary Public.

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

Ans.

Renewal of a bill of exchange refers to substituting the old bill with a new bill.

When the acceptor of a bill is not in a position to meet the bill on its due date, he/she may with the consent of the holder accept a fresh bill in place of the old bill after cancelling the old bill is called renewal of a bill.

Q.11 Give the performa of a Bills Receivable book.

Ans.

Specimen of a Bills Receivable book:

No. of Bill

Date Received

Date of Bill

From whom received

Drawer

Acceptor

Where Payable

Term

Due date

L.F.

Cash Book Folio

Remarks

Q.12 Give the performa of a Bills Payable Book.

Ans.

Specimen of a Bills Payable Book:

No. of Bill

Date of Bill

To Whom Given

Drawer

Payee

Where payable

Term

Due Date

L.F.

paid

Date

Cash Book Folio

Remarks

Q.13 What is retirement of a bill of exchange?

Ans.

If the drawee or the acceptor wishes to pay the amount of the bill before the date of maturity is called Retirement of a bill of exchange. In such a case, the drawer may allow him a concession called Rebate or Discount at certain rate calculated on the unexpired period of maturity of the bill.

Q.14 Give the meaning of rebate.

Ans.

Rebate is a discount allowed by the drawer to the drawee when he accepts the payments of the bill before its due date.

Q.15 Give the performa of a bill of exchange.

Ans.

Samira Noida 20,000 April 01, 2015 Three months after date pay to me or my order, the sum of twenty thousand only, for value received. Stamp Accepted (Signed) (Signed) Samira Kumar Swati A15, Sec 62 01/04/2015 Noida D20, Sector 63, Noida To Swati D20, Sec. 63, Noida

Here, Samira is the drawer and Swati is the Drawee. Since Swati has accepted the bill, she is the acceptor.

Q.16 A bill of exchange must contain “an unconditional promise to pay”. Do you agree with a statement?

Ans.

According to the Negotiable Instruments Act 1881, 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.

Features of a bill of exchange:

• A bill of exchange must be in writing.
• It is an order to make payment.
• The order to make payment is unconditional.
• The maker of the bill of exchange must sign it.
• The payment to be made must be certain.
• The date on which payment is made must also be certain.
• The bill of exchange must be payable to a certain person.
• The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a fixed period of time.
• It must be stamped as per the requirement of law.

Q.17 Briefly explain the effects of dishonour and noting of a bill of exchange.

Ans.

Dishonour of a Bill means a situation when the acceptor of the bill refuses or is unable to pay the amount. In such a case, the holder of the bill can recover the amount from the Drawer or any of the previous endorsers. The holder of the bill may present the bill through a Notary Public and get the dishonour of the bill noted.

Noting will consist of the following:

• Date, fact and reasons of dishonour;
• If the bill is not expressly dishonoured, the reasons why he/she treats it as dishonoured and
• The amount of noting charges.

The entries recorded for noting charges in the drawers book are as follows:

When drawer himself pays:

Drawee’s A/c	Dr.
To Cash A/c

Where endorsee pays:

Drawee’s A/c	Dr.
To Endorsee A/c

When the bank pays on discounted bill:

Drawee’s A/c	Dr.
To Bank A/c

When the bank pays in the event of sending the bill for collection to the bank:

Drawee’s A/c	Dr.
To Bank A/c

It may be noted that whosoever pays the noting charges, ultimately these have to be borne by the drawee.

Q.18 Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.

Ans.

The term maturity refers the date on which a bill of exchange becomes due for payment. In arriving at the maturity date three days, known as days of grace, must be added to the date on which the period of credit expires instrument is payable.

Suppose a bill dated March 05 is payable 30 days after date it, falls due on Apr 07, i.e., 33 days after March 05 if were payable one month after date, the due date would be April 08, i.e., one month and 3 days after March 05.

However where the date of maturity is a public holiday, the instrument will become due on the preceding business day. In this case if April 08, falls on a public holiday then the April 07 will be the maturity date.

But when an emergency holiday is declared under the Negotiable Instrument Act 1881, by the Government of India which may happen to be the date of maturity of a bill of exchange, then it will be next working day.

Procedures:

• Days of grace are not allowed when the bill is payable ‘on demand’ or ‘at sight’.
• When the period of the bill is stated in days, the calculation of the maturity date will be in days (which includes the date of payment but exclude the date of transaction).
• When the period of the bill is in months, calculation of maturity will be in terms of calendar months, ignoring the number of days in a month.
• If the maturity date falls on a day which is a ‘public holiday’ the maturity date of the bill shall be preceding business day.

Q.19 Distinguish between bill of exchange and promissory note.

Ans.

Basis	Bill of Exchange	Promissory Note
Drawer	Creditor is the Drawer.	Debtor is the Drawer.
Order or Promise and Parties	It contains an order to make payment. There can be three parties to it, viz, drawer, drawee and the payee.	It contains a promise to make payment. There are only two parties to it, viz, drawer and the payee.
Acceptance	It requires acceptance by the drawee or someone also on his behalf.	It does not require any acceptance.
Liability	Liability of the drawer arises only if the acceptor does not pay.	Promisor has the primary liability to pay.
Notice	In case of dishonour, due notice of dishonour is to be given by the holder to the drawer.	No notice needs to be given in case of dishonour.
Stamp	Bills payable on demand need not to be stamped but otherwise stamps would be necessary.	It has to be stamped in any case.

Q.20 Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.

Ans.

When a bill of exchange is to be retired before the due date by mutual understanding between the drawer and the drawee. This happens when the drawee of the bill has funds at his disposal and makes a request to the drawer or holder to accept the payment of the bill before its maturity. If the holder agrees to do so, the bill is said to retired.

The retiring of a bill draws a curtain on the bill transactions before the expiry of its normal term. To encourage the retirement, the holder allows some discount called Rebate on bills for the period between date of retirement and maturity. The rebate is calculated at a certain rate of interest.

Following journal entries are recorded:

In the books of the drawer:

On the retiring the acceptance and rebate allowed:

Cash A/c	Dr.
Rebate on bills A/c	Dr.
To Bills Receivables A/c

In the books of Drawee:

Bills Payable A/c	Dr.
Cash A/c	Dr.
To Rebate on Bills A/c

Q.21 Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.

Ans.

Bills Receivable book has been designed as a summary of information regarding a duly accepted bill received by a drawer. All the details of the bill-date, acceptor’s name, amount, term, place of payment, etc., are entered in the bills receivable book.

The Specimen of Bills Receivable Book:

No. of Bill

Date Received

Date of Bill

From whom received

Drawer

Acceptor

Where Payable

Term

Due date

L.F.

Cash Book Folio

Remarks

Features:

• The bills receivable book is totaled periodically.
• This total is debited to the ‘Bills Receivable Account’ whereas the account of every individual debtor whom the bills received is credited in the ledger.
• It would always have a debit balance.
• This balance on any date would represent the amount of bills receivable unmatured and on hand.

The question is presently out of syllabus.

Q.22 Briefly explain the benefits of maintaining a Bills Payable Book and state how is its posting is done in the ledger?

Ans.

Bills Payable Book is maintained like a Bills Receivable book.

It is meant to record all the details, relating to the bills accepted by a person or a party, which are retained for being use in the future, in case of need.

The specimen of Bills Payable book:

No. of Bill

Date of Bill

To Whom Given

Drawer

Payee

Where payable

Term

Due Date

L.F.

paid

Date

Cash Book Folio

Remarks

The posting from this books are made to the debit of the account of every creditor to whom acceptance has been given and the periodical total of the books is credited to the ‘Bills Payable Account’ in the ledger.

The bills payable account representing the liability of the acceptor in respect of bills accepted by him, always has a credit balance.

Q.23 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.

Ans.

Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Reddy	Dr.		10,000
	To Sales A/c				10,000
	(Being goods sold to Reddy on credit)
Jan 1	Cash A/c	Dr.		5,000
	Bills Receivable A/c	Dr.		5,000
	To Reddy				10,000
	(Being half of the amount of credit sales and acceptance for remaining half amount received)
Feb 3	Cash A/c	Dr.		5,000
	To Bills Receivable A/c				5,000
	(Being cash received on due date)

In the Books of Reddy
Rao’s Account
Date	Particulars		Date	Particulars
2016			2016
Jan 1	To Cash A/c	5,000	Jan 1	By Purchase A/c	10,000
Jan 1	To Bills Receivable A/c	5,000
		10,000			10,000

Q.24 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 unware 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.

Ans.

In the Books of Parvati Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Shankar	Dr.		8,000
	To Sales A/c				8,000
	(Being goods sold to Shankar on credit)
Jan 1	Bills Receivable A/c	Dr.		8,000
	To Shankar				8,000
	(Being acceptance received)
Apr 5	Cash A/c	Dr.		8,000
	To Bills Receivable A/c				8,000
	(Being Shankar met his acceptance on maturity)

In the Books of Shankar Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Purchases A/c	Dr.		8,000
	To Parvati				8,000
	(Being goods purchased from Parvati on credit)
Jan 1	Parvati	Dr.		8,000
	To Bills Payable A/c				8,000
	(Being acceptance given)
Apr 5	Bills Payable A/c	Dr.		8,000
	To Cash A/c				8,000
	(Being bills payable paid on maturity)

Q.25 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.

Ans.

In the Books of Vishal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2015
Jan 5	Manju	Dr.		7,000
	To Sales A/c				7,000
	(Being goods sold to Manju)
Jan 5	Bills Receivable A/c	Dr.		7,000
	To Manju				7,000
	(Being acceptance received)
Apr 5	Bank A/c	Dr.		6,860
	Discount A/c	Dr.		140
	To Bills Receivable A/c				7,000
	(Being Bills discounted with the bank at the rate of 12% per annum)

Working Note:

\begin{array}{l}\text{Calculation of Interest:}\\ \text{= 7,000 x}\frac{\text{12}}{\text{100}}\text{x}\frac{\text{2}}{\text{12}}\text{= 140}\end{array}

In the Books of Manju Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2015
Jan 5	Purchase A/c	Dr.		7,000
	To Vishal				7,000
	(Being goods purchased from Vishal)
Jan 1	Vishal	Dr.		7,000
	To Bills Payable A/c				7,000
	(Being acceptance given)
Mar 8	Bills Payable A/c	Dr.		7,000
	To Bank A/c				7,000
	(Being Bills payable paid on maturity)

Q.26 On Feb 01, 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 jimmy and jimmy account in the books of John.

Ans.

In the Books of Jimmi Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	John	Dr.		15,000
	To Sales A/c				15,000
	(Being goods sold to John)
Feb 1	Bank A/c	Dr.		5,000
	Bills Receivable A/c	Dr.		10,000
	To John				15,000
	(Being acceptance received on 10,000 and 5,000 cash received)
Mar 10	Bill sent for Collection	Dr.		10,000
	To Bills Receivable A/c				10,000
	(Being bill sent for collection)
Mar 15	Bank A/c	Dr.		10,000
	To Bill Sent for Collection				10,000
	(Being bill sent for collection, collected by the bank)

John’s Account
Date	Particulars		Date	Particulars
2016			2016
Feb 1	To Sales	15,000	Feb 1	By Bank A/c	5,000
			Feb 1	By Bills Receivable A/c	10,000
		15,000			15,000

In the Books of John Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Purchases A/c	Dr.		15,000
	To Jimmi				15,000
	(Being goods purchased from Jimmi)
Feb 1	Jimmi	Dr.		15,000
	To Bank A/c				5,000
	To Bills Payable A/c				10,000
	(Being acceptance given for 10,000 and payment of 5,000 made)
Mar 15	Bills Payable A/c	Dr.		10,000
	To Bank				10,000
	(Being bills payable paid on maturity)

Jimmi’s Account
Date	Particulars		Date	Particulars
2016			2016
Feb 1	To Bank	5,000	Feb 1	By Purchase A/c	15,000
Feb 1	To Bills Payable	10,000
		15,000			15,000

Q.27 On Jan 15, 2015, Kartar sold goods for 30,000 to Bhagwan and drew upon him three bills of exchange 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.

Ans.

In the Books of Kartar Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2015
Jan 15	Bhagwan	Dr.		30,000
	To Sales A/c				30,000
	(Being goods sold to Bhagwan)
Jan 15	Bills Receivable 1st	Dr.		10,000
	Bills Receivable 2nd	Dr.		10,000
	Bills Receivable 3rd	Dr.		10,000
	To Bhagwan				30,000
	(Being three acceptance received each for 10,000)
Jan 15	Ratan	Dr.		10,000
	To Bills Receivable 2nd				10,000
	(Being 2nd bill endorsed in favour of Ratan)
Jan 15	Bank A/c	Dr.		9,850
	Discount A/c	Dr.		150
	To Bills Receivable 3rd				10,000
	(Being 3rd bill discounted by the bank at the rate of 6% per annum)
Feb 18	Cash A/c	Dr.		10,000
	To Bills Receivable 1st				10,000
	(Being payment received on maturity)

Bhagwan’s Account
Date	Particulars		Date	Particulars
2015			2015
Jan 15	To Sales A/c	30,000	Jan 15	By Bills Receivable 1st	10,000
				By Bills Receivable 2nd	10,000
				By Bills Receivable 3rd	10,000
		30,000			30,000

In the Books of Bhagwan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2015
Jan 15	Purchases A/c	Dr.		30,000
	To Kartar				30,000
	(Being goods purchased)
Jan 15	Kartar	Dr.		30,000
	To Bills Payable 1st				10,000
	To Bills Payable 2nd				10,000
	To Bills Payable 3rd				10,000
	(Being three acceptances given each for 10,000)
Feb 18	Bills Payable 1st	Dr.		10,000
	To Cash A/c				10,000
	(Being 1st bill paid on maturity)
Mar 18	Bills Payable 2nd	Dr.		10,000
	To Bank A/c				10,000
	(Being 2nd bill paid on maturity)
Apr 18	Bills Payable 3rd	Dr.		10,000
	To Bank A/c				10,000
	(Being 3rd bill met on maturity)

Kartar’s Account
Date	Particulars		Date	Particulars
2015			2015
Jan 15	To Bills Payable 1st	10,000	Jan 15	By Purchases A/c	30,000
	To Bills Payable 2nd	10,000
	To Bills Payable 3rd	10,000
		30,000			30,000

Q.28 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.

Ans.

In the Books of Arun Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Sunil	Dr.		30,000
	To Sales A/c				30,000
	(Being goods sold to Sunil)
Jan 1	Cash A/c	Dr.		14,700
	Discount A/c	Dr.		300
	To Sunil				15,000
	(Being 50% of bills amount with 2% cash discount and acceptance of rest 50% bill amount received)
Jan 1	Bills Receivable A/c	Dr.		15,000
	To Sunil				15,000
	(Being acceptance received)
Jan 23	Cash A/c	Dr.		15,000
	To Bills Receivable A/c				15,000
	(Being payment received on maturity)

In the Books of Sunil Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Purchase A/c	Dr.		30,000
	To Arun				30,000
	(Being goods purchased)
Jan 1	Arun	Dr.		15,000
	To Cash A/c				14,700
	To Discount A/c				300
	(Being 50% bill amount with 2% discount and acceptance of rest 50% bill amount made)
Jan 1	Arun	Dr.		15,000
	To Bills Payable A/c				15,000
	(Being acceptance given)
Jan 23	Bills Payable A/c	Dr.		15,000
	To Cash A/c				15,000
	(Being payment made on maturity)

Q.29 Darshan sold goods for 40,000 to Varun on 08/01/2016 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.

1. When the bill was retained by Darshan till the date of its maturity.
2. When Darshan immediately discounted the bill @ 6% p.a. with his bank.
3. When the bill was enclosed immediately by Darshan in favour of his creditor Suresh.
4. When three days before its maturity, the bill was sent by Darshan to his bank for collection.

Ans.

In the Books of Darshan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Varun	Dr.		40,000
	To Sales A/c				40,000
	(Being goods sold to Varun)
Jan 8	Bills Receivable A/c	Dr.		40,000
	To Varun				40,000
	(Being acceptance received)
Mar 11	Cash A/c	Dr.		40,000
	To Bills Receivable A/c				40,000
	(Being payment received on maturity)

When Darshan immediately discounted the bill at the rate of 6% per annum with his bank:

In the Books of Darshan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Varun	Dr.		40,000
	To Sales A/c				40,000
	(Being goods sold to Varun)
Jan 8	Bills Receivable A/c	Dr.		40,000
	To Varun				40,000
	(Being acceptance received)
Jan 8	Bank A/c	Dr.		39,600
	Discount A/c	Dr.		400
	To Bills Receivable A/c				40,000
	(Being bill discounted with the bank at the rate of 6% per annum)

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

In the Books of Darshan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Varun	Dr.		40,000
	To Sales A/c				40,000
	(Being goods sold to Varun)
Jan 8	Bills Receivable A/c	Dr.		40,000
	To Varun				40,000
	(Being acceptance received)
Jan 8	Suresh	Dr.		40,000
	To Bills Receivable A/c				40,000
	(Being bill endorsed to Suresh)

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

In the Books of Darshan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Varun	Dr.		40,000
	To Sales A/c				40,000
	(Being goods sold to Varun)
Jan 8	Bills Receivable A/c	Dr.		40,000
	To Varun				40,000
	(Being acceptance received)
Mar 8	Bill sent for collection	Dr.		40,000
	To Bills Receivable				40,000
	(Being bill sent for collection)
Mar 8	Bank A/c	Dr.		40,000
	To Bill sent for collection				40,000
	(Being bill met on maturity)

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

In the Books of Varun Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Purchase A/c	Dr.		40,000
	To Darshan				40,000
	(Being goods purchased)
Jan 8	Darshan	Dr.		40,000
	To Bills Payable A/c				40,000
	(Being acceptance given)
Mar 11	Bills Payable A/c	Dr.		40,000
	To Cash A/c				40,000
	(Being bills payable paid on maturity)

When Darshan immediately discounted the bill at the rate of 6% per annum with his bank:

In the Books of Varun Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Purchase A/c	Dr.		40,000
	To Darshan				40,000
	(Being goods purchased from Darshan on credit)
Jan 8	Darshan	Dr.		40,000
	To Bills Payable A/c				40,000
	(Being acceptance given)
Mar 11	Bills Payable A/c	Dr.		40,000
	To Bank A/c				40,000
	(Being payment made on maturity)

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

In the Books of Varun Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Purchase A/c	Dr.		40,000
	To Darshan				40,000
	(Being goods purchased)
Jan 8	Darshan	Dr.		40,000
	To Bills Payable A/c				40,000
	(Being acceptance given)
Mar 11	Bills Payable A/c	Dr.		40,000
	To Cash A/c				40,000
	(Being payment made on maturity)

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

In the Books of Varun Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 8	Purchase A/c	Dr.		40,000
	To Darshan				40,000
	(Being goods purchased)
Jan 8	Darshan	Dr.		40,000
	To Bills Payable A/c				40,000
	(Being acceptance given)
Mar 11	Bills Payable A/c	Dr.		40,000
	To Cash A/c				40,000
	(Being payment made on maturity)

Q.30 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
Dec. 21, 2016	1,000
Dec. 26, 2016	1,200
Dec. 18, 2016	2,000
Dec. 31, 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 25/01/2017 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.

Ans.

In the Books of Bansal Traders Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2016
Dec 21	Mohan Traders		Dr.			900
	To Sales A/c						900
	(Being goods sold to Mohan Traders and allowed 10% trade discount)
Dec 21	Bills Receivable 1st		Dr.			900
	To Mohan Traders						900
	(Being acceptance received)
Dec 26	Mohan Traders		Dr.			1,080
	To Sales						1,080
	(Being goods sold 10% trade discount allowed)
Dec 26	Bills Receivable A/c		Dr.			1,080
	To Mohan Traders						1,080
	(Being acceptance received)
Dec 26	Bank A/c		Dr.			1,071
	Discount A/c		Dr.			9
	To Bills Receivable A/c						1,080
	(Being bill discounted with the bank at the rate of 12% per annum)
Dec 28	Mohan Traders	Dr.				1,800
	To Sales A/c						1,800
	(Being goods sold to Mohan Traders and allowed 10% trade discount)
Dec 28	Bills Receivable A/c			Dr.		1,800
	To Mohan Traders						1,800
	(Being acceptance received)
Dec 28	Dream Soaps A/c		Dr.			1,900
	To Bills Receivable A/c						1,800
	To Discount A/c						100
	(Being acceptance received from Mohan Traders endorsed to dream soaps in full settlement of ` 1,900 purchase)
Dec 31	Mohan Traders		Dr.			4,500
	To Sales A/c						4,500
	(Being goods sold to Mohan Traders and allowed 10% trade discount)
Dec 31	Bills Receivable A/c		Dr.			4,500
	To Mohan Traders						4,500
	(Being acceptance received)
2017
Jan 23	Cash A/c		Dr.			900
	To Bills Receivable A/c						900
	(Being promissory note issued was met on maturity)
Jan 25	Bill Sent for collection		Dr.			4,500
	To Bills Receivable						4,500
	(Being bill sent to the bank for collection)
Feb 2	Bank A/c		Dr.			4,500
	To Bill Sent for Collection						4,500
	(Being bill met on maturity)

In the Books of Bansal Traders Mohan Traders’ Account
Date	Particulars		Date	Particulars
2016			2016
Dec 21	To Sales A/c	900	Dec 21	By Bills Receivable	900
Dec 26	To Sales A/c	1,080	Dec 26	By Bills Receivable	1,080
Dec 28	To Sales A/c	1,800	Dec 28	By Bills Receivable	1,800
Dec 31	To Sales A/c	4,500	Dec 31	By Bills Receivable	4,500
		8,280			8,280

In the Books of Mohan Traders Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2016
Dec 21	Purchases A/c		Dr.			900
	To Bansal Traders						900
	(Being goods purchased and 10% trade discount received)
Dec 21	Bansal Traders		Dr.			900
	To Bills Payable A/c						900
	(Being acceptance given)
Dec 26	Purchases A/c		Dr.			1,080
	To Bansal Traders						1,080
	(Being goods purchased and 10% trade discount received)
Dec 26	Bansal Traders		Dr.			1,080
	To Bills Payable A/c						1,080
	(Being acceptance given)
Dec 28	Purchase A/c		Dr.			1,800
	To Bansal Traders						1,800
	(Being goods purchased and 10% trade discount received)
Dec 28	Bansal Traders	Dr.				1,800
	To Bills Payable A/c						1,800
	(Being goods purchased from Bansal Traders)
Dec 31	Purchase A/c			Dr.		4,500
	To Bansal Traders						4,500
	(Being goods purchased from Bansal Traders)
Dec 31	Bansal Traders		Dr.			4,500
	To Bills Payable A/c						4,500
	(Being acceptance given)
2017
Jan 23	Bills Payable A/c		Dr.			900
	To Cash A/c						900
	(Being bill paid on maturity)
Jan 28	Bills Payable A/c		Dr.			1,080
	To Bank A/c						1,080
	(Being bills payable paid on maturity)
Jan 30	Bills Payable A/c					1,800
	To Cash A/c		Dr.				1,800
	(Being bills payable paid on maturity)
Feb 2	Bills Payable A/c					4,500
	To Bank A/c		Dr.				4,500
	(Being bills payable paid on maturity)

In the books of Mohan Traders Bansal Traders’ Account
Date	Particulars		Date	Particulars
2016			2016
Dec 21	To Bills Payable	900	Dec 21	By Purchase A/c	900
Dec 26	To Bills Payable	1,080	Dec 26	By Purchase A/c	1,080
Dec 28	To Bills Payable	1,800	Dec 28	By Purchase A/c	1,800
Dec 31	To Bills Payable	4,500	Dec 31	By Purchase A/c	4,500
		8,280			8,280

Q.31 Narayanan purchased goods for 25,000 from Ravinderan on Feb. 01, 2016. 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.

Ans.

When the bill was retained by Ravinderan with him till the date of its maturity:

In the Books of Ravinderan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Narayanan	Dr.		25,000
	To Sales A/c				25,000
	(Being goods sold to Narayanan)
Feb 1	Bill Receivable A/c	Dr.		25,000
	To Narayanan				25,000
	(Being acceptance received)
Mar 5	Narayanan	Dr.		25,000
	To Bills Receivable A/c				25,000
	(Being bill dishonoured)

When the bill was discounted with bank at the rate of 6%:

In the Books of Ravinderan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Narayanan	Dr.		25,000
	To Sales A/c				25,000
	(Being goods sold to Narayanan)
Feb 1	Bills Receivable A/c	Dr.		25,000
	To Narayanan				25,000
	(Being acceptance received)
Feb 1	Bank A/c	Dr.		24,875
	Discount A/c	Dr.		125
	To Bills Receivable A/c				25,000
	(Being bill discounted with the bank at the rate of 6% per annum)
Mar 5	Narayanan	Dr.		25,000
	To Bank A/c				25,000
	(Being bill dishonoured)

When the bill was endorsed to his creditor Ganeshan.

In the Books of Ravinderan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Narayanan	Dr.		25,000
	To Sales A/c				25,000
	(Being goods sold to Narayanan)
Feb 1	Bills Receivable A/c	Dr.		25,000
	To Narayanan				25,000
	(Being acceptance received)
Feb 1	Ganeshan	Dr.		25,000
	To Bills Receivable A/c				25,000
	(Being acceptance of Narayanan endorsed to Ganeshan)
Mar 5	Narayanan	Dr.		25,000
	To Ganeshan				25,000
	(Being bill dishonoured)

When the bill was sent by Ravinderan to his bank for collection.

In the Books of Ravinderan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Narayanan	Dr.		25,000
	To Sales A/c				25,000
	(Being goods sold to Narayanan)
Feb 1	Bills Receivable A/c	Dr.		25,000
	To Narayanan				25,000
	(Being acceptance received)
Mar 5	Bill Sent for Collection	Dr.		25,000
	To Bills Receivable				25,000
	(Being bill sent for collection)
Mar 5	Narayanan	Dr.		25,000
	To Bill Sent for Collection				25,000
	(Being bill dishonoured)

When the bill was retained by Ravinderan with him till the date of it maturity.

In the Books of Narayanan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Purchases A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being goods purchased)
Feb 1	Ravinderan	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 5	Bills Payable A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being bill dishonoured)

When the bill was discounted with the bank at the rate of 6%.

In the Books of Narayanan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Purchases A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being goods purchased)
Feb 1	Ravinderan	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 5	Bills Payable A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being bill dishonoured)

When the bill was endorsed to his creditor Ganeshan.

In the Books of Narayanan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Purchases A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being goods purchased)
Feb 1	Ravinderan	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 5	Bills Payable A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being bill dishonoured)

When the bill was sent by Ravinderan to his bank for collection.

In the Books of Narayanan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 1	Purchases A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being goods purchased)
Feb 1	Ravinderan	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 5	Bills Payable A/c	Dr.		25,000
	To Ravinderan				25,000
	(Being bill dishonoured)

Q.32 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 dishonoured by Sudershan on maturity. Sudershan settled Ravi’s claim in cash three days after the dishonour of each bill along with interest @12% pa. 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.

Ans.

In the Books of Ravi Journal Entries
Date	Particulars					L.F	Dr. ()	Cr. ()
2016
Feb 13	Sudershan	Dr.					40,000
	To Sales A/c							40,000
	(Being goods sold to Sudershan)
Feb 13	Bills Receivable 1st	Dr.					5,000
	Bills Receivable 2nd	Dr.					10,000
	Bills Receivable 3rd	Dr.					12,000
	Bills Receivable 4th	Dr.					13,000
	To Sudershan							40,000
	(Being four acceptances received from Sudershan)
Feb 13	Bank A/c	Dr.					4,975
	Discount A/c	Dr.					25
	To Bills Receivable 1st A/c							5,000
	(Being 1st bill discounted with the bank at the rate of 6%)
Feb 13	Mustaq		Dr.				10,200
	To Bills Receivables 2nd							10,000
	To Discount Received A/c							200
	(Being 2nd acceptance of Sudershan endorsed to Mustaq or 10,200)
Mar 3	Bill Sent for Collection			Dr.			13,000
	To Bills Receivable 4th A/c							13,000
	(Being bill sent for collection)
Mar 7	Sudershan			Dr.			13,000
	To Bill Sent for Collection							13,000
	(Being bill sent to the bank for collection was dishonoured)
Mar 7	Sudershan			Dr.			81
	To Interest A/c							81
	(Being interest at the rate of 12% due for 19 days)
Mar 10	Cash A/c			Dr.			13,081
	To Sudershan							13,081
	(Being cash received from Sudershan)
Mar 16	Sudershan				Dr.		5,000
	To Bank A/c							5,000
	(Being first bill dishonoured)
Mar 16	Sudershan			Dr.			50
	To Interest A/c							50
	(Being interest at the rate of 12% due for one month)
Mar 19	Cash A/c			Dr.			5,050
	To Sudershan							5,050
	(Being payment received from Sudershan in final settlement)
Mar 28	Sudershan			Dr.			10,000
	Discount A/c			Dr.			200
	To Mustaq							10,200
	(Being bill dishonoured on due date and discounted)
Mar 28	Sudershan			Dr.			132
	To Interest A/c							132
	(Being interest at the rate of 12% due)
Apr 1	Cash A/c			Dr.			10,132
	To Sudershan							10,132
	(Being payment received)
May 16	Sudershan			Dr.			12,000
	To Bills Receivable 3rd A/c							12,000
	(Being bill dishonoured on due date)
May 16	Sudershan			Dr.			360
	To Interest A/c							360
	(Being interest due at the rate of 12% per annum)
May 19	Cash A/c			Dr.			12,360
	To Sudershan							12,360
	(Being cash received from Sudershan)

Sudershan’s Account
Date	Particulars		Date	Particulars
2016			2016
Feb 13	To Sales A/c	40,000	Feb 13	By Bills Receivable 1st A/c	5,000
Mar 7	To Bill sent for collection	13,000	Feb 13	By Bills Receivable 2nd A/c	10,000
Mar 7	To Interest A/c	81	Feb 13	By Bills Receivable 3rd A/c	12,000
Mar 16	To Bank A/c	5,000	Feb 13	By Bills Receivable 4th A/c	13,000
Mar 16	To Interest A/c	50	Feb 13	By Cash A/c	13,081
Mar 28	To Mustaq	10,000	Mar 19	By Cash A/c	5,050
Mar 28	To Interest A/c	132	Mar 19	By Cash A/c	10,132
May 16	To Bills Receivable 3rd	12,000	Apr 1	By Cash A/c	12,360
May 19	To Interest	360	May 19
		80,623			80,623
Mustaq’s Account
Date	Particulars		Date	Particulars
2016			2016
Feb 13	To Bills Receivable A/c	10,000	Mar 28	To Sudershan	10,000
Feb 13	To Discount Received A/c	200	Mar 28	To Discount Received A/c	200
		10,200			10,200

In the Books of Sudershan Journal Entries
Date	Particulars					L.F	Dr. ()	Cr. ()
2016
Feb 13	Purchases A/c	Dr.					40,000
	To Ravi							40,000
	(Being goods purchased)
Feb 13	Ravi	Dr.					40,000
	To Bills Payable 1st							5,000
	To Bills Payable 2nd							10,000
	To Bills Payable 3rd							12,000
	To Bills Payable 4th							13,000
	(Being four acceptance given)
Mar 7	Bills Payable 4th A/c	Dr.					13,000
	To Ravi							13,000
	(Being bill dishonoured on maturity)
Mar 7	Interest A/c		Dr.				81
	To Ravi							81
	(Being interest at the rate of 12% due)
Mar 10	Ravi			Dr.			13,081
	To Cash A/c							13,081
	(Being payment made to Ravi)
Mar 16	Bills payable A/c			Dr.			5,000
	To Ravi							5,000
	(Being bill dishonoured on due date)
Mar 16	Interest A/c			Dr.			50
	To Ravi							50
	(Being interest at the rate of 12% due)
Mar 19	Ravi			Dr.			5,050
	To Cash A/c							5,050
	(Being payment made to Ravi)
Mar 28	Bills Payable 2nd A/c				Dr.		10,000
	To Ravi							10,000
	(Being bill dishonoured on due date)
Mar 28	Interest A/c			Dr.			132
	To Ravi							132
	(Being interest due to Ravi)
Apr 10	Ravi			Dr.			10,132
	To Cash A/c							10,132
	(Being payment made to Ravi)
May 16	Bills Payable 3rd			Dr.			12,000
	To Ravi							12,000
	(Being bill dishonoured on due date)
May 16	Interest A/c			Dr.			360
	To Ravi							360
	(Being interest due at the rate of 12% per annum)
May 19	Ravi			Dr.			12,360
	To Cash A/c							12,360
	(Being payment made to Ravi) (Being bill dishonoured on due date and discount cancelled)

In the Books of Mustaq Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Feb 13	Bills Receivable 2nd	Dr.		10,000
	Discount Allowed A/c	Dr.		200
	To Ravi				10,200
	(Being acceptance received)
Mar 28	Ravi	Dr.		10,200
	To Bills Receivable				10,000
	To Discount Received				200
	(Being bill dishonoured on due date and discount cancelled)

In the Books of Bank Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Mar 3	Bills Receivable A/c	Dr.		13,000
	To Bill for Collection				13,000
	(Being bill received from Ravi for collection)
Mar 7	Bill for Collection	Dr.		13,000
	To Bills Receivable				13,000
	(Being bill dishonoured)

Q.33 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.

Ans.

In the Books of Neha Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Muskan	Dr.		20,000
	To Sales A/c				20,000
	(Being goods sold to Muskan)
Jan 1	Bills Receivable A/c	Dr.		20,000
	To Muskan				20,000
	(Being acceptance received)
Feb 4	Cash A/c	Dr.		19,800
	Rebate on Bill A/c	Dr.		200
	To Bills Receivable A/c				20,000
	(Being retired her acceptance and rebate allowed to her)

In the Books of Mukesh Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 1	Purchase A/c	Dr.		20,000
	To Neha				20,000
	(Being goods purchased from Neha)
Jan 1	Neha	Dr.		20,000
	To Bills Payable A/c				20,000
	(Being acceptance given)
Feb 4	Bills Payable A/c	Dr.		20,000
	To Cash A/c				19,800
	To Rebate on Bill A/c				200
	(Being acceptance in favour of Neha retired and rebate received)

Q.34 On Jan 15, 2016 Raghu sold goods worth 35,000 to Devendra and drew upto 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 the 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.

Ans.

In the Books of Raghu Journal Entries
Date	Particulars					L.F	Dr. ()	Cr. ()
2016
Jan 15	Devendra	Dr.					35,000
	To Sales A/c							35,000
	(Being goods sold to him)
Jan 16	Bills Receivables 1st	Dr.					5,000
	Bills Receivables 2nd	Dr.					20,000
	Bills Receivables 3rd	Dr.					10,000
	To Devendra							35,000
	(Being three acceptances received from Devendra)
Jan 15	Dewan	Dr.					5,200
	To Bills Receivable 1st A/c							5,000
	To Discount Received A/c							200
	(Being acceptance of Devendra endorsed to Dewan for 5,200)
Jan 15	Bank A/c		Dr.				19,700
	Discount A/c		Dr.				300
	To Bills Receivables 2nd A/c							20,000
	(Being bill discounted by the bank at the rate of 6%)
Apr 18	Devendra			Dr.			20,030
	To Bank A/c							20,030
	(Being bill dishonoured and noting charges paid by the bank 30)
May 14	Bill Sent for Collection			Dr.			10,000
	To Bills Receivable 3rd							10,000
	(Being bill sent for the collection)
May 18	Devendra			Dr.			10,200
	To Bill Sent for Collection							10,000
	To Bank A/c							200
	(Being bill sent for collection dishonoured and bank paid noting charges of 200)
May 23	Devendra			Dr.			1,000
	To Interest A/c							1,000
	(Being interest due to Devendra)
May 23	Cash A/c				Dr.		31,230
	To Devendra							31,230
	(Being final payment received)

Devendra’s Account
Date	Particulars		Date	Particulars
2016			2016
Jan 15	To Sales A/c	35,000	Jan 15	By Bill Receivable 1st	5,000
Apr 18	To Bank	20,030	Jan 15	By Bill Receivable 2nd	20,000
May 18	To Bill Sent for Collection	10,000	Jan 15	By Bill Receivable 3rd	10,000
May 18	To Bank	200	May 23	By Cash	31,230
		66,230			66,230

In the Books of Devendra Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2016
Jan 15	Purchase A/c	Dr.				35,000
	To Raghu						35,000
	(Being goods purchased from Raghu)
Jan 15	Raghu	Dr.				35,000
	To Bills Payable 1st						5,000
	To Bills Payable 2nd						20,000
	To Bills Payable 3rd						10,000
	(Being three acceptance given to Raghu)
Feb 18	Bills Payable A/c	Dr.				5,000
	To Cash						5,000
	(Being bill dishonoured on due date)
Apr 8	Bills Payable A/c		Dr.			20,000
	Noting Charges A/c		Dr.			30
	To Raghu						20,030
	(Being bill dishonoured noting charges paid by Raghu)
May 18	Bills Payable A/c			Dr.		10,000
	Noting Charges A/c					200
	To Raghu						10,200
	(Being bill dishonoured and noting charges paid by bank)
May 23	Interest A/c			Dr.		1,000
	To Raghu						1,000
	(Being interest due to Raghu)
May 23	Cash A/c			Dr.		31,230
	To Bank Loan A/c						31,230
	(Being short term bank loan taken for the purpose)
May 23	Raghu			Dr.		31,230
	To Cash A/c						31,230
	(Being payment made to Raghu)

Raghu’s Account
Date	Particulars		Date	Particulars
2016			2016
Jan 15	To Bills Payable 1st	5,000	Jan 15	By Purchases	35,000
Jan 15	To Bills Payable 2nd	20,000	Apr 18	By Bills Payable 2nd	20,000
Jan 15	To Bills Payable 3rd	10,000	Apr 18	By Noting Charges	30
May 23	To Cash	31,230	May 18	By Bills Payable 3rd	10,000
			May 19	By Noting Charges	200
			May 18	By Interest	1,000
		66,230			66,230

In the Books of Dewan Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Bills Receivable A/c	Dr.		5,000
	Discount Allowed A/c	Dr.		200
	To Raghu				5,200
	(Being bills receivable received from Raghu and allowed with discount)
Feb 18	Cash A/c	Dr.		5,000
	To Bills Receivable A/c				5,000
	(Being bill met on maturity)

Note: In this question, there is no information regarding honour of the first bill of 5,000. Therefore, it has been assumed that the first bill has been met on maturity.

Q.35 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 shared.
• Five days before its maturity the bill was sent by Kamal to his bank for collection.

Ans.

When the bill was retained by Kamal till the date of its maturity:

In the Books of Kamal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Vimal	Dr.		25,000
	To Sales A/c				25,000
	(Being goods sold to Vimal)
Jan 15	Bills Receivable A/c	Dr.		25,000
	To Vimal				25,000
	(Being acceptance received)
Mar 18	Vimal	Dr.		25,000
	To Bills Receivable A/c				25,000
	(Being bill dishonoured)

When the bill was immediately discounted by Kamal at the rate of 6%:

In the Books of kamal Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
Jan 15	Vimal	Dr.			25,000
	To Sales A/c					25,000
	(Being goods sold to Vimal)
Jan 15	Bill Receivable A/c	Dr.			25,000
	To Vimal					25,000
	(Being acceptance received)
Jan 15	Bank A/c	Dr.			24,750
	Discount A/c	Dr.			250
	To Bills Receivable A/c					25,000
	(Being bill discounted at the rate of 6% per annum)
Mar 18	Vimal		Dr.		25,000
	To Bank A/c					25,000
	(Being bill dishonoured on due date)

When the bill was endorsed to Sharad:

In the Books of kamal Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
Jan 15	Vimal	Dr.			25,000
	To Sales A/c					25,000
	(Being goods sold to Vimal)
Jan 15	Bills Receivable A/c	Dr.			25,000
	To Vimal					25,000
	(Being acceptance received)
Jan 15	Sharad	Dr.			25,000
	To Bills Receivable A/c					25,000
	(Being bill endorsed to Sharad)
May 18	Vimal		Dr.		25,000
	To Sharad					25,000
	(Being bill dishonoured on made)

When the bill was sent for collection:

In the Books of kamal Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
Jan 15	Vimal	Dr.			25,000
	To Sales A/c					25,000
	(Being goods sold to Vimal)
Jan 15	Bills Receivable A/c	Dr.			25,000
	To Vimal					25,000
	(Being acceptance received)
Mar 13	Bill Sent for Collection	Dr.			25,000
	To Bills Receivable					25,000
	(Being bill sent for collection)
Mar 18	Vimal		Dr.		25,000
	To Bill Sent for Collection					25,000
	(Being bill dishonoured on due date)

When the bill was retained by Kamal till the date of its maturity:

In the Books of Vimal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Purchases A/c	Dr.		25,000
	To Kamal				25,000
	(Being goods purchased from Kamal)
Jan 15	Kamal	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 18	Bills Payable A/c	Dr.		25,000
	To Kamal				25,000
	(Being bill dishonoured)

When the bill was immediately discounted by Kamal at the rate of 6%:

In the Books of Vimal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Purchase A/c	Dr.		25,000
	To Kamal				25,000
	(Being goods purchased from Kamal)
Jan 15	Kamal	Dr.		25,000
	To Bills payable A/c				25,000
	(Being acceptance given)
Mar 18	Bills Payable A/c	Dr.		25,000
	To kamal				25,000
	(Being bill dishonoured)

When the bill was endorsed to Sharad:

In the Books of Vimal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Purchase A/c	Dr.		25,000
	To Kamal				25,000
	(Being goods purchased from Kamal)
Jan 15	Kamal	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 18	Bills Payable A/c	Dr.		25,000
	To Kamal				25,000
	(Being bill dishonoured)

When the bill was sent for collection:

In the Books of Vimal Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2016
Jan 15	Purchase A/c	Dr.		25,000
	To Kamal				25,000
	(Being goods purchased from Kamal)
Jan 15	Kamal	Dr.		25,000
	To Bills Payable A/c				25,000
	(Being acceptance given)
Mar 18	Bills Payable A/c	Dr.		25,000
	To Kamal				25,000
	(Being bill dishonoured)

Q.36 Abdulla 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.

Ans.

In the Books of Abdulla Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Jan 17	Tahir	Dr.				18,000
	To Sales A/c						18,000
	(Being goods sold to Tahir)
Jan 17	Bills Receivable A/c	Dr.				18,000
	To Tahir						18,000
	(Being acceptance received)
Mar 4	Tahir	Dr.				18,040
	To Bills Receivable A/c						18,000
	To Cash A/c						40
	(Being bill dishonoured and noting charges due to Tahir)
Mar 7	Tahir		Dr.			660
	To Interest A/c						660
	(Being interest due to Tahir)
Mar 12	Cash A/c			Dr.		18,700
	To Tahir						18,700
	(Being payment received from Tahir with interest)

Tahir’s Account
Date	Particulars		Date	Particulars
2017			2017
Jan 17	To Sales	18,000	Jan 17	By Bills Receivable	18,000
Mar 7	To Bills Receivable	18,000	Mar 12	By Cash	18,700
Mar 7	To Cash	40
Mar 7	To Interest	660
		36,700			36,700

In the Books of Tahir Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Jan 12	Purchase A/c	Dr.				18,000
	To Abdulla						18,000
	(Being goods purchased from Abdulla)
Jan 17	Abdulla	Dr.				18,000
	To Bills Payable A/c						18,000
	(Being acceptance given)
Mar 7	Bills Payable A/c	Dr.				18,000
	Noting Charges A/c	Dr.				40
	To Abdulla						18,040
	(Being bill dishonoured and noting charges paid)
Mar 7	Interest A/c		Dr.			660
	To Abdulla						660
	(Being interest due to Abdulla)
Mar 9	Abdulla			Dr.		18,700
	To Cash A/c						18,700
	(Being payment made to Abdulla with interest)

Abdulla’s Account
Date	Particulars		Date	Particulars
2017			2017
Jan 17	To Bills Payable	18,000	Jan 17	By Purchase A/c	18,000
Mar 17	To Cash A/c	18,700	Mar 4	By Bills Payable	18,000
			Mar 4	By Noting Charges	40
			Mar 9	By Interest	660
		36,700			36,700

Q.37 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.

Ans.

In the Books of Asha Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Mar 2	Nisha	Dr.			19,000
	To Sales A/c					19,000
	(Being goods sold to Nisha)
Mar 2	Cash A/c	Dr.			4,000
	Bills Receivable A/c	Dr.			15,000
	To Nisha					19,000
	(Being 4,000 cash and acceptance for 15,000 received)
Mar 2	Bank A/c	Dr.			14,625
	Discount A/c	Dr.			375
	To Bills Receivable					15,000
	(Being bill discounted by bank)
Jun 5	Nisha		Dr.		15,030
	To Bank A/c					15,030
	(Being bill dishonoured on due date and noting charges paid)

In the Books of Nisha Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Mar 2	Purchases A/c	Dr.		19,000
	To Asha				19,000
	(Being goods purchased)
Mar 2	Asha	Dr.		19,000
	To Cash A/c				4,000
	To Bills Payable A/c				15,000
	(Being 4,000 cash and acceptance for 15,000 given to Asha)
Jun 5	Bills Payable A/c	Dr.		15,000
	Noting Charges A/c	Dr.		30
	To Asha				15,030
	(Being bill dishonoured and noting charges paid)

Q.38 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.

Ans.

In the Books of Sharma Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Feb 2	Verma	Dr.				17,500
	To Sales A/c						17,500
	(Being goods sold to Verma)
Feb 2	Cash A/c	Dr.				2,500
	Bills Receivable A/c	Dr.				15,000
	To Verma						17,500
	(Being 2,500 received and acceptance for 15,000 received)
Feb 2	Gupta	Dr.				15,400
	To Bills Receivable A/c						15,000
	To Discount A/c						400
	(Being promissory note of Verma endorsed to Gupta for 15,400)
Apr 5	Discount Received A/c			Dr.		400
	Verma			Dr.		15,050
	To Gupta						15,450
	(Being promissory note dishonoured on maturity)
Apr 6	Internet A/c		Dr.			50
	To Gupta		Dr.				50
	(Being interest of 50 debited to Gupta)
Apr 6	Gupta A/c	Dr.				15,500
	To Bank A/c						15,500
	(Being Gupta’s account settled)
Apr 8	Bank A/c	Dr.				15,050
	To Verma						15,050
	(Being cheque received from Verma for the amount due from him)

Verma’s Account
Date	Particulars		Date	Particulars
2017			2017
Feb 2	To Sales A/c	17,500	Feb 2	By Cash A/c	2,500
Apr 6	To Gupta	15,050	Feb 2	By Bills Receivable	15,000
			Apr 6	By Bank A/c	15,050
		32,550			32,550

Gupta’s Account
Date	Particulars		Date	Particulars
2017			2017
Feb 2	To Bills Receivable	15,000	Apr 1	By Balance b/d	15,400
Feb 2	To Discount Received	400	Apr 6	By Verma	15,050
Feb 2	To Bank	15,500	Apr 6	By Discount Received	400
			Apr 1	By Interest	50
		30,900			30,900

In the Books of Verma Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Feb 2	Purchase A/c	Dr.			17,500
	To Sharma					17,500
	(Being goods purchased)
Feb 2	Sharma	Dr.			17,500
	To Cash A/c					2,500
	To Bills Payable A/c					15,000
	(Being cash 2,500 and acceptance for 15,000 given to Sharma)
Apr 6	Bills Payable A/c	Dr.			15,000
	Noting Charges A/c	Dr.			50
	To Sharma					15,050
	(Being promissory note dishonoured on maturity)
Apr 6	Sharma		Dr.		15,050
	To Bank A/c					15,050
	(Being payment made to Sharma with interest of 450)

Sharma’s Account
Date	Particulars		Date	Particulars
2017			2017
Feb 2	To Cash A/c	2,500	Feb 2	By Purchase A/c	17,500
Feb 2	To Bills Payable	15,000	Feb 2	By Bills Payable	15,000
Apr 6	To Bank A/c	15,050	Apr 6	By Noting Charges	50
		32,550			32,550

In the Books of Gupta Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Feb 2	Bills Receivable A/c	Dr.			15,000
	Discount Allowed A/c	Dr.			400
	To Sharma					15,400
	(Being promissory note received from Sharma in full settlement)
Apr 6	Sharma	Dr.			15,450
	To Bills Receivable					15,000
	To Discount Allowed					400
	To Bank					50
	(Being promissory note received from Sharma dishonoured)
Apr 6	Sharma	Dr.			50
	To Interest A/c					50
	(Being interest on account of promissory note dishonoured)
Apr 6	Bank A/c		Dr.		15,500
	To Sharma					15,500
	(Being cheque received from Sharma)

Q.39 Lilly sold goods to Methew on 01/03/2017 for 12,000 and drew upon Methew 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 Methew and Lilly paid 45 as noting charges. Methew 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 Methew and prepare Mathew’s account in the books of Lilly and Lilly’s account in the books of Methew.

Ans.

In the Books of Lilly Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Mar 1	Methew	Dr.			12,000
	To Sales A/c					12,000
	(Being goods sold to Methew)
Mar 1	Bills Receivable	Dr.			12,000
	To Methew					12,000
	(Being Methew’s acceptance payable after two months received)
Mar 1	Bank A/c	Dr.			11,820
	Discount A/c	Dr.			180
	To Bills Receivable					12,000
	(Being Methew’s bill discounted at 9% per annum)
May 3	Methew A/c		Dr.		12,045
	To Bank A/c					12,045
	(Being Methew’s acceptance dishonoured, bank paid 45 as noting charges)
May 8	Methew	Dr.			241
	To Interest A/c					241
	(Being interest at the rate of 12% credited to Methew on account of bill dishonoured)
May 8	Bank A/c	Dr.			12,286
	To Methew					12,286
	(Being cheque received from Methew for the amount due from him)

Methew’s Account
Date	Particulars		Date	Particulars
2017			2017
Mar 1	To Sales A/c	12,000	Mar 1	By Bills Receivable	12,000
May 3	To Bank A/c	12,045	May 8	By Bank	12,286
May 8	To Interest	241
		24,286			24,286

In the Books of Methew Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Mar 1	Purchase A/c	Dr.			12,000
	To Lilly					12,000
	(Being goods bought from Lilly)
Mar 1	Lilly	Dr.			12,000
	To Bills Payable A/c					12,000
	(Being Lilly’s acceptance payable after two months accepted)
May 3	Bills Payable	Dr.			12,000
	Noting Charges A/c	Dr.			45
	To Lilly					12,045
	(Being bill drawn by Lilly dishonoured)
May 8	Interest A/c		Dr.		241
	To Lilly					241
	(Being interest charged at the rate of 12% from Lilly on account of bill dishonoured)
May 8	Lilly	Dr.			12,286
	To Bank A/c					12,286
	(Being amount paid to Lilly through cheque)

Lilly’s Account
Date	Particulars		Date	Particulars
2017			2017
Mar 1	To Bills Payable	12,000	Mar 1	By Purchase A/c	12,000
May 9	To Bank	12,286	May 3	By Bills Payable	12,000
			May 3	By Noting Charges	45
			May 8	By Interest	241
		24,286			24,286

Note: In this question, there is a contradiction. As per the discounting rule–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 45. Thus, we have assumed that it is bank and not Lilly who presents, discounts and pays the noting charges in case of dishonour of bill.

Q.40 Kapil purchased goods for 21,000 from Gaurav on 01/02/2017 and accepted a bill of exchange drawn by Gaurav for the same amount. The bill was payable after one month. On 25/02/2017 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.

Ans.

In the Books of Gaurav Journal Entries
Date	Particulars			L.F	Dr. ()	Cr. ()
2017
Feb 1	Kapil	Dr.			21,000
	To Sales A/c					21,000
	(Being goods sold to Kapil)
Feb 1	Bills Receivable A/c	Dr.			21,000
	To Kapil					21,000
	(Being acceptance received from Kapil)
Feb 5	Bill Sent for Collection	Dr.			21,000
	To Bills Receivable A/c					21,000
	(Being bill sent to the bank for collection)
Mar 4	Kapil		Dr.		21,100
	To Bill Sent for Collection					21,000
	To Bank A/c					100
	(Being bill dishonoured on due date and noting charges paid)

In the Books of Kapil Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Feb 1	Purchase A/c	Dr.		21,000
	To Gaurav				21,000
	(Being goods purchased from Gaurav on credit)
Feb 1	Gaurav	Dr.		21,000
	To Bills Payable A/c				21,000
	(Being acceptance given)
Mar 4	Bills Payable A/c	Dr.		21,000
	Noting Charges A/c	Dr.		100
	To Gaurav				21,100
	(Being bill dishonoured and noting charges due)

Q.41 On Feb, 14 2017 Rashmi sold goods 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 Apr 10, 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

Ans.

In the Books of Rashmi Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Feb 14	Alka	Dr.				7,500
	To Sales A/c						7,500
	(Being goods sold to Alka)
Feb 14	Cash A/c	Dr.				500
	Bills Receivable A/c	Dr.				7,000
	To Alka						7,500
	(Being acceptance received along with 500 cash)
Apr 10	Alka	Dr.				7,000
	To Bills Receivable						7,000
	(Being bill cancelled before the due date)
Apr 10	Cash A/c		Dr.			2,000
	To Alka						2,000
	(Being 2,000 received)
Apr 10	Alka			Dr.		500
	To Interest A/c						500
	(Being interest of 500 due)
Apr 10	Bills Recievable A/c			Dr.		5,500
	To Alka						5,500
	(Being acceptance received from Alka along with interest)
Jun 13	Cash A/c			Dr.		5,500
	To Bills Receivable A/c						5,500
	(Being payment received on maturity)

Alka’s Account
Date	Particulars		Date	Particulars
2017
Feb 14	To Sales A/c	7,500	Feb 14	By Cash A/c	500
Apr 10	To Bills Recievable A/c	7,000	Feb 14	By Bills Receivable A/c	7,000
Apr 10	To Interest A/c	500	Apr 10	By Cash A/c	2,000
			Apr 12	By Bills Recievable A/c	5,500
		15,000			15,000

In the Books of Alka Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Feb 14	Purchases A/c	Dr.				7,500
	To Rashmi						7,500
	(Being goods purchased from Rashmi)
Feb 14	Rashmi	Dr.				7,500
	To Cash A/c						500
	To Bills Payable A/c						7,000
	(Being cash 500 and acceptable for 7,000 given)
Apr 10	Bills Payable A/c	Dr.				7,000
	To Rashmi						7,000
	(Being bill cancelled before the due date)
Apr 10	Rashmi		Dr.			2,000
	To Cash A/c						2,000
	(Being 2,000 cash paid to her)
Apr 10	Interest A/c			Dr.		500
	To Rashmi						500
	(Being 500 interest due)
Apr 10	Rashmi			Dr.		5,500
	To Bills Payable A/c						5,500
	(Being acceptance given along with interest)
Jun 13	Bills Payable A/c			Dr.		5,500
	To Cash A/c						5,500
	(Being bills payable paid on due date)

Rashmi’s Account
Date	Particulars		Date	Particulars
2017			2017
Feb 14	To Cash A/c	500	Feb 14	By Purchases	7,500
Feb 14	To Bills Payable	7,000	Apr 10	By Bills Payable	7,000
Apr 10	To Cash A/c	2,000	Apr 10	By Interest	500
Apr 10	To Bills Payable	5,500
		15,000			15,000

Q.42 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.

Ans.

In the Books of Nikhil Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Dec 1	Akhil	Dr.		23,000
	To Sales A/c				23,000
	(Being goods sold to Akhil)
Dec 1	Bills Receivable a/c	Dr.		23,000
	To Akhil				23,000
	(Being acceptance received)
Dec 1	Bank A/c	Dr.		22,540
	Discount A/c	Dr.		460
	To Bills Receivable A/c				23,000
	(Being bill discounted with the bank at the rate of 12% per annum)
Feb 4	Akhil	Dr.		23,100
	To Bank A/c				23,100
	(Being bills dishonoured and noting charges paid by bank)
Feb 4	Akhil	Dr.		385
	To Interest A/c				385
	(Being interest at the rate of 10% per annum due)
Feb 4	Bills Receivable A/c	Dr.		23,485
	To Akhil				23,485
	(Being new acceptance received along with interest)
Apr 1	Akhil	Dr.		23,485
	To Bills Receivable A/c				23,485
	(Being new acceptance cancelled before maturity)
Apr 1	Cash A/c	Dr.		10,000
	To Akhil				10,000
	(Being cash received from Akhil 10,000)
Apr 1	Akhil	Dr.		500
	To Interest A/c				500
	(Being cash received from Akhil 10,000)
Apr 1	Bills Receivable A/c	Dr.		13,985
	To Akhil				13,985
	(Being bill from Akhil received)
Apr 1	Cash A/c	Dr.		13,985
	To Bills Receivable A/c				13,985
	(Being payment received on maturity)

Akhil’s Account

Date	Particulars		Date	Particulars
2017			2017
Dec 1	To Sales	23,000	Dec 1	By Bills Receivable	23,000
Feb 4	To Bank	23,100	Feb 4	By Bills Receivable	23,485
Feb 4	To Interest	385	Apr 1	By Cash	10,000
Apr 1	To Bills Receivable	23,485	Apr 1	By Bills Receivable	13,985
Apr 1	To Interest	500
		70,470			70,470

In the Books of Akhil Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Dec 1	Purchases A/c	Dr.		23,000
	To Nikhil				23,000
	(Being goods purchased for Nikhil)
Dec 1	Nikhil	Dr.		23,000
	To Bills Payable A/c				23,000
	(Being acceptance given)
Feb 4	Bills Payable A/c	Dr.		23,000
	Noting Charges A/c	Dr.		100
	To Nikhil				23,100
	(Being bill dishonoured and noting charges due)
Feb 4	Interest A/c	Dr.		385
	To Nikhil				385
	(Being interest at the rate of 10% due)
Feb 4	Nikhil	Dr.		23,485
	To Bills Payable A/c				23,485
	(Being new acceptance given along with interest)
Apr 1	Bills Payable A/c	Dr.		23,485
	To Nikhil				23,485
	(Being second acceptance cancelled before maturity)
Apr 1	Nikhil	Dr.		10,000
	To Cash A/c				10,000
	(Being cash given to Nikhil)
Apr 1	Interest A/c	Dr.		500
	To Nikhil				500
	(Being interest due to Nikhil for bill cancellation)
Apr 1	Nikhil	Dr.		13,985
	To Bills Payable A/c				13,985
	(Being new bill acceptance payable after one month)
May 4	Bills Payable A/c			13,985
	To Cash A/c				13,985
	(Being payment made on maturity)

Nikhil’s Account
Date	Particulars		Date	Particulars
2017			2017
Dec 1	To Bills Payable	23,000	Dec 1	By Purchases	23,000
Feb 4	To Bills Payable	23,485	Feb 4	By Bills Payable	23,000
Apr 1	To Cash	10,000	Feb 4	By Noting Charges	100
Apr 1	To Bills Payable	13,985	Feb 4	By Interest	385
			Mar 31	By Bills Payable	23,485
			Mar 31	By Interest	500
		70,470			70,470

Q.43 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.

Ans.

In the Books of Vibha Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Jan 1	Sudha	Dr.				18,000
	To Sales A/c						18,000
	(Being goods sold to Sudha)
Jan 1	Bills Receivable A/c	Dr.				18,000
	To Sudha						18,000
	(Being acceptance received)
Jan 1	Geeta	Dr.				18,000
	To Bills Receivable A/c						18,000
	(Being acceptance of Sudha endorsed to Geeta)
Feb 27	Sudha		Dr.			18,000
	To Geeta						18,000
	(Being acceptance of Sudha cancelled before maturity)
Feb 27	Geeta			Dr.		18,000
	To Cash A/c						18,000
	(Being payment made to Geeta and bills received)
Feb 27	Bills Receivable A/c			Dr.		18,200
	To Sudha						18,000
	To Interest A/c						200
	(Being new acceptance received with interest 200)
Mar 2	Cash A/c			Dr.		18,200
	To Sudha						18,200
	(Being payment received on maturity)

Q.44 Following was the position of debtor and creditor of Gautam as on 01/01/2017:

Particulars	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 05/01/2017.
Jan 04: Babu’s bill discounted for 4,750.
Jan 08: Chanderkela sent a promissory note for 8,000 payable three months after date.
Jan 10: Promissory note received from Chanderkela discounted for 7,900.
Jan 12: Accepted Shelba 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.

Ans.

Bills Receivable Book:

Date of Bill	Date Received	From Whom	Drawer Whom Received	Acceptor	Where	Term payable	Due Date	L.F.		Cash Book Folio	Remarks
Jan 2	Jan 5	Babu	Self	Babu		2 Months	Mar 5		4,800

Bills Payable Book:

Date of Bill	To whom given	Drawer	Payee	Where payable	Term	Due Date	L.F		Date paid	Cash Book Folio	Remarks
Jan 12	Sheiba	Sheiba			2 Months	Mar 15		12,000
Jan 25	Anju	Anju			2 Months	Apr 28		5,000
								17,000

Cash Book:

Date	Particulars	J.F.	Cash	Bank	Date	Particulars	J.F.	Cash	Bank
2017					2015
Jan 4	To Bills Receivable			4,750
Jan 10	To Bills Receivable			7,900
Jan 29	To Kiran		2,000		Jan 31	By Balance c/d		2,000	12,650
			2,000	12,650				2,000	12,650

In the Books of Gautam Journal Entries
Date	Particulars				L.F	Dr. ()	Cr. ()
2017
Jan 5	Discount Allowed A/c	Dr.				200
	To Babu						200
	(Being Babu’s acceptance received and allowed him discount 200)
Jan 4	Discount A/c	Dr.				50
	To Bills Receivable A/c						50
	(Being Babu’s acceptance discounted with a discount of 50)
Jan 8	Bills Receivable A/c	Dr.				8,000
	To chanderkala						8,000
	(Being promissory note from Chanderkala received)
Jan 10	Discount A/c		Dr.			100
	To Bills Receivable A/c						100
	(Being Chanderkala’s promissory note discounted with bank at discount of 100)
Jan 22	Bills Receivable A/c			Dr.		14,000
	To Anita						14,000
	(Being promissory note received from Anita)
Jan 23	Manju			Dr.		14,000
	To Bills Receivable A/c						14,000
	(Being Anita’s promissory note endorsed to Manju)
Jan 29	Bills Receivable A/c			Dr.		11,500
	To Kiran						11,500
	(Being promissory note from Karan received)

Q.45 On Jan 01, 2017 Harsh accepted a month’s 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. Harsh duly honoured his acceptance.

Record the journal entries in the books of Tanu and Harsh.

Ans.

In the Books of Tanu Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Jan 1	Bills Receivable A/c	Dr.		10,000
	To Harsh				10,000
	(Being acceptance received from Harsh for a month)
Jan 1	Bank A/c	Dr.		9,933
	Discount A/c	Dr.		67
	To Bills Receivable A/c				10,000
	(Being bill discounted with the bank at the rate of 8% per annum)
Feb 4	Harsh	Dr.		10,000
	To Bank A/c				10,000
	(Being a cheque sent to Harsh on due date for paying of accommodation bill)

In the Books of Harsh Journal Entries
Date	Particulars		L.F	Dr. ()	Cr. ()
2017
Jan 1	Tanu	Dr.		10,000
	To Bills Payable A/c				10,000
	(Being acceptance received for one month)
Feb 4	Bank A/c	Dr.		10,000
	To Tanu				10,000
	(Being cheque received from Tanu on due date)
Feb 4	Bills Payable A/c	Dr.		10,000
	To Bank A/c				10,000
	(Being acceptance paid on maturity)