Page 122 - DEBK-XI(2020)

Accounting for Bills of Exchange 16.3

Solved Questions

1. On 1st January, 2017, A received ` 25,000 in cash and two bills for
` 45,000 and ` 30,000 for 2 months each from B, duly accepted by the latter, against
sale proceeds. The first bill was endorsed to C in settlement of his account ` 45,500
and the second bill discounted from bank @ 12% p.a. on the date of acceptance of
bills. Both the bills were dishonoured on due date. C has paid ` 100 and the bank
has paid ` 80 as noting charges. B paid ` 20,000 and noting charges in cash and
accepted a new bill for balance at 3 months. The interest on balance @ 18% p.a.
was paid in cash.

On due date of the new bill, B became insolvent and no amount was recovered
from his estate. Pass Journal entries in the books of the Drawer, Drawee and
the Bank.

Solution:
JOURNAL OF A (DRAWER)
Date Particulars L.F. Dr. (`) Cr. (`)
2017
Jan. 1 B ...Dr. 1,00,000
To Sales A/c 1,00,000
(Being the goods sold to B)

Jan. 1 Cash A/c ...Dr. 25,000
Bills Receivable (I) A/c ...Dr. 45,000
Bills Receivable (II) A/c ...Dr. 30,000
To B 1,00,000
(Being the cash and acceptance for bills received)

Jan. 1 C ...Dr. 45,500
To Bills Receivable (I) A/c 45,000
To Discount Received A/c 500
(Being the Bills Receivable (I) endorsed to C in full settlement)
Jan. 1 Bank A/c ...Dr. 29,400
Discounting Charges A/c (` 30,000 × 12/100 × 2/12) ...Dr. 600
To Bills Receivable (II) A/c 30,000
(Being the Bills Receivable (II) discounted @ 12% p.a.)

March 4 B ...Dr. 45,100
Discount Received A/c ...Dr. 500
To C 45,600
(Being the bill for ` 45,000 dishonoured at maturity and
` 100 paid as noting charges)