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Question -

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.



Answer -

Books of Sharma

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

02 Feb

Verma

Dr.

17,500

To Sales A/c

17,500

(Goods tradedto Verma)

02 Feb

Cash A/c

Dr.

2,500

Bills Receivable A/c

Dr.

15,000

To Verma

17,500

(Cash ₹ 2,500 and Promissory Note ₹ 15,000 received

from Verma for 60 days)

02 Feb

Gupta A/c

Dr.

15,400

To Bills Receivable A/c

15,000

To Discount Received A/c

400

(Promissory Note endorsed to Gupta in full settlement

of amount due to him)

05 Apr

Discount Received A/c

Dr.

400

Verma

Dr.

15,050

To Gupta

15,450

(Promissory Note issued by Verma dishonoured

and Gupta paid ₹ 50 as noting charges)

Note: In this question ₹ 5,000 is given as noting charges,

there is mistake. Here ₹ 50 has been taken as noting

charges instead of ₹ 5,000).

06 Apr

Interest A/c

Dr.

50

To Gupta

50

(Interest of ₹ 50 debited to Gupta, on account of

dishonour of Promissory Note)

06 Apr

Gupta

Dr.

15,500

To Bank A/c

15,500

(Gupta’s A/c settled)

06 Apr

Bank A/c

Dr.

15,050

To Verma

15,050

(Cheque received from Verma for the amount due from him)

Ledger

Verma’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount ₹

Date

Particulars

J.F.

Amount ₹

2017

2017

02 Feb

Sales

17,500

02 Feb

Cash

2,500

06 Apr

Gupta

15,050

02 Feb

Bills Receivable

15,000

06 Apr

Bank

15,050

32,550

32,550

 

Gupta’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

2017

2017

02 Feb

B/R

15,000

01 Apr

Balance b/d

15,400

02 Feb

Discount Received

400

06 Apr

Verma

15,050

02 Feb

Bank

15,500

06 Apr

Discount Reserved

400

06 Apr

Interest

50

30,900

30,900

Books of Verma

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

02 Feb

Purchases A/c

Dr.

17,500

To Sharma

17,500

(Goods purchased from Sharma)

02 Feb

Sharma

Dr.

17,500

To Bills Payable A/c

15,000

To Cash A/c

2,500

(Cash ₹ 2,500 paid and Promissory Note made for

the balance)

06 Apr

Bills Payable A/c

Dr.

15,000

Noting Charges A/c

Dr.

50

To Sharma

15,050

(Promissory Note dishonoured on maturity)

06 Apr

Sharma

Dr.

15,050

To Bank A/c

15,050

(Payment made to Sharma through cheque)

 

Ledger

 Sharma’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

2017

2017

02 Feb

Cash

2,500

02 Feb

Purchases

17,500

02 Feb

Bills Payable

15,000

06 Apr

Bills Payable

15,000

06 Apr

Bank

50

06 Apr

Noting Charges

50

30,900

30,900

Books of Gupta

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

02 Feb

Bills Receivable A/c

Dr.

15,000

Discount Allowed A/c

Dr.

400

To Sharma

15,400

(Promissory Note ₹ 15,000 received from Sharma in

full settlement for 60 days)

06 Apr

Sharma

Dr.

15,450

To Bills Receivable A/c

15,000

To Discount Allowed A/c

400

To Bank A/c

50

(Promissory note established from Sharma, dishonoured)

06 Apr

Sharma

Dr.

50

To Interest A/c

50

(Interest ₹ 50 credited on account of Promissory Note

dishonoured)

06 Apr

Bank A/c

Dr.

15,500

To Sharma

15,500

(Cheque received from Sharma)

 

Ledger

 Sharma’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

2017

2017

01 Feb

Balance b/d

15,400

02 Feb

Bills Receivable

15,000

06 Apr

Bills Receivable

15,000

02 Feb

Discount Allowed

400

06 Apr

Discount Allowed

4,000

06 Apr

Bank

15,500

06 Apr

Bank

50

06 Apr

Interest

50

30,900

30,900

 

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