Page 126 - DEBK-XI(2020)

Accounting for Bills of Exchange 16.7

3. On 1st January, 2017, Gaurav drew on Chetan three Bills of Exchange in full
settlement of claim. The first ` 14,000 at one month, the second for ` 16,000 at two
months and the third for ` 18,000 at three months. The bills were duly accepted
by Chetan.
The first bill was endorsed by Gaurav to his creditor Tarun on 3rd January, 2017,
the second bill was discounted on 15th January, 2017, for ` 15,900 and the third
bill was sent to Bank for collection on 4th February 2017. All the bills were duly
met on maturity except the second bill which was dishonoured, noting charges
being ` 240. Gaurav charged Chetan ` 300 for interest and drew on him a fourth
bill for two months for the amount due. The fourth bill was duly met on maturity.

Pass Journal entries in the books of Gaurav.
Solution: In the Books of Gaurav
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2017
Jan. 1 Bills Receivable A/c ...Dr. 48,000
To Chetan 48,000
(Being the three bills received from Chetan: Bill No. I for ` 14,000 at one month,
Bill No. II for ` 16,000 at two months and Bill No. III for ` 18,000 at three months)
Jan. 3 Tarun ...Dr. 14,000
To Bills Receivable A/c 14,000
(Being the Bill No. I endorsed to Tarun, a creditor)
Jan. 15 Bank A/c ...Dr. 15,900
Discounting Charges A/c ...Dr. 100
To Bills Receivable A/c 16,000
(Being the Bill No. II discounted from Bank)
Feb. 4 Bills Sent for Collection A/c ...Dr. 18,000
To Bills Receivable A/c 18,000
(Being the Bill No. III sent to bank for collection)
March 4 Chetan ...Dr. 16,240
To Bank A/c 16,240
(Being the Bill No. II dishonoured, noting charges ` 240)
March 4 Chetan ...Dr. 300
To Interest A/c 300
(Being the Interest for 2 months charged to Chetan)
March 4 Bills Receivable A/c ...Dr. 16,540
To Chetan 16,540
(Being the Bill No. IV received from Chetan at two months)
April 4 Bank A/c ...Dr. 18,000
To Bills Sent for Collection A/c 18,000
(Being the Bill No. III collected by Bank)
May 7 Bank/Cash A/c ...Dr. 16,540
To Bills Receivable A/c 16,540
(Being the amount of Bill No. IV collected on matuirty)