Chapter 8 Bills of Exchange Solutions
Question - 21 : - Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.
Answer - 21 : -
In day to day operations, a business receives many bills. Maintaining a journal for all such bills is a cumbersome task. In this case, a specialized book is created which keeps record of all such bills that are received from the debtors. This book contains all the necessary information such as bill date, due date, amount, debtors name and it is summed up on a periodical basis and the balance thus obtained is transferred to debit side of the bills receivable account.
Maintaining a bills receivable book has following benefits:
1. All information pertaining to the bills receivable, such as due date, amount, etc., get recorded in one place, thereby makes it easy to access the records.
2. Likelihood of fraud is greatly minimized as bills are recorded in one place.
3. Higher level of liability and obligation exists on the person maintaining the accounts. If any error is spotted, it can be rectified easily.
4. Time of the accountant is saved as recording of transactions are recurring and similar in nature.
5. As it is a particular book only dealing with bills receivable, it is easy to locate all details pertaining to a specific bill of exchange.
Answer - 22 : -
Maintaining bills payable book has following benefits:
1. Quick, efficient and accurate recording of business transactions.
2. Minimizes the chances of fraud as all the bills are recorded at one place
3. A high degree of accountability and answerability on part of the accountant is observed as all the transactions get verified by the same person which leads to easy detection and rectification of errors.
4. As information is documented by an individual, it improves the division of labour and efficiency of organization.
Procedure of posting to ledger:
The recordings from the Bills Payable Book are posted to the accounts of the creditors who received acceptance from the debtors. These books are then totaled periodically and credited to the Bills Payable Account in the ledger.
Answer - 23 : -
| Books of Rao |
| Journal |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Jan | Reddy | Dr. | | 10,000 | |
| | To Sales A/c | | | | 10,000 |
| (Goods tradedto Reddy) | | | | |
| | | | | |
| 01 Jan | Cash A/c | Dr. | | 5,000 | |
| | To Reddy | | | | 5,000 |
| (Cash received from Reddy) | | | | |
| | | | | |
| 01 Jan | Bills Receivable A/c | Dr. | | 5,000 | |
| | To Reddy | | | | 5,000 |
| (Bill received for 30 days accepted by Reddy) | | | | |
| | | | | | |
| 03 Feb | Cash A/c | Dr. | | 5,000 | |
| | To Bills Receivable A/c | | | | 5,000 |
| (Reddy’s acceptance met on due date) | | | | |
| | | | | |
| Books of Reddy |
| Rao’s Account |
| Dr. | | | | | | | Cr. |
| Date | Particulars | J.F. | Amount ₹ | Date | Particulars | J.F. | Amount ₹ |
| 01 Jan | Cash | | 5,000 | 2016 | | | |
| 01 Jan | Bills Receivable | | 5,000 | 01 Jan | Purchases | | 10,000 |
| | | | | | | |
| | | 10,000 | | | | 10,000 |
| | | | | | | |
Question - 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 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 - 24 : -
| Books of Parvati |
| Journal |
| Date | Particulars | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Jan | Shankar | Dr. | | 8,000 | |
| | To Sales A/c | | | | 8,000 |
| (Sold goods to Shankar) | | | | |
| | | | | |
| 01 Jan | Bills Receivable A/c | Dr. | | 8,000 | |
| | To Shankar | | | | 8,000 |
| (Shankar sent Promissory Note for three months) | | | | |
| | | | | |
| 05 Apr | 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 ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Jan | Purchases A/c | Dr. | | 8,000 | |
| | To Parvati | | | | 8,000 |
| (Goods purchased from Parvati) | | | | |
| | | | | |
| 01 Jan | Parvati | Dr. | | 8,000 | |
| | To Bills Payable A/c | | | | 8,000 |
| (Promissory note for three months sent to Parvati) | | | | |
| | | | | |
| 05 Apr | Bills Payable A/c | Dr. | | 8,000 | |
| | To Cash A/c | | | | 8,000 |
| (Cash paid on maturity of promissory note) | | | | |
| | | | | |
| | | | | | | |
| | | | | | | | | | | |
Question - 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.
Answer - 25 : -
| Books of Vishal |
| Journal |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 05 Jan | Manju | Dr. | | 7,000 | |
| | To Sales A/c | | | | 7,000 |
| (Good Manju) | | | | |
| | | | | |
| 05 Jan | Bills Receivable A/c | Dr. | | 7,000 | |
| | To Manju | | | | 7,000 |
| (Manju’s acceptance received for two months) | | | | |
| | | | | |
| 05 Jan | 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 ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 05 Jan | Purchases A/c | Dr. | | 7,000 | |
| | To Vishal | | | | 7,000 |
| (purchasing from Vishal) | | | | |
| | | | | |
| 05 Jan | Vishal | Dr. | | 7,000 | |
| | To Bills Payable A/c | | | | 7,000 |
| (Bill drawn by Vishal acknowledged) | | | | |
| | | | | |
| 08 Mar | Bills Payable A/c | Dr. | | 7,000 | |
| | To Bank A/c | | | | 7,000 |
| (Bill Payable Amount paid to bank on maturity) | | | | |
| | | | | |
| | | | | | | |
| | | | | | | | | | | | | | |
Question - 26 : - On 01 Feb, 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 Jimmi and Jimmi account in the books of John.
Answer - 26 : -
| Books of Jimmi |
| Journal |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Feb | John | Dr. | | 15,000 | |
| | To Sales A/c | | | | 15,000 |
| (Goods traded to John) | | | | |
| | | | | |
| 01 Feb | Bank A/c | Dr. | | 5,000 | |
| | To John | | | | 5,000 |
| (Cheque acknowledged for ₹ 5,000 from John) | | | | |
| | | | | | |
| 01 Feb | Bills Receivable A/c | Dr. | | 10,000 | |
| | To John | | | | 10,000 |
| (Bill received from John for 40 days) | | | | |
| | | | | | |
| 10 Mar | Bill Sent for Collection A/c | Dr. | | 10,000 | |
| | To Bills Receivable A/c | | | | 10,000 |
| (John’s approval sent to bank for collection) | | | | |
| | | | | | |
| 15 Mar | Bank A/c | Dr. | | 10,000 | |
| | To Bill Sent for Collection A/c | | | | 10,000 |
| (John’s approval met on due date and bank got the payment) | | | |
| | | | |
| | | | | | | |
| Ledger John’s Account |
| Dr. | | | | | | | Cr. |
| Date | Particulars | J.F. | Amount ₹ | Date | Particulars | J.F. | Amount ₹ |
| 2016 | | | | 2016 | | | |
| 01 Feb | Sales | | 15,000 | 01 Feb | Bank | | 5,000 |
| | | | 01 Feb | Bills Receivable | | 10,000 |
| | | | | | | |
| | | 15,000 | | | | 15,000 |
| | | | | | | |
| | | | | | | | | | | | | | |
| Books of John |
| Journal |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Feb | Purchases A/c | Dr. | | 15,000 | |
| | To Jimmi | | | | 15,000 |
| (Goods purchased from Jimmi) | | | | |
| | | | | |
| 01 Feb | Jimmi | Dr. | | 5,000 | |
| | To Bank A/c | | | | 5,000 |
| (Cheque payment done to Jimmi) | | | | |
| | | | | |
| 01 Feb | Jimmi | Dr. | | 10,000 | |
| | To Bills Payable A/c | | | | 10,000 |
| (Bill drawn by Jimmi acknowledged for 40 days) | | | | |
| | | | | | |
| 15 Mar | Bills Payable A/c | Dr. | | 10,000 | |
| | To Bank A/c | | | | 10,000 |
| (Payment of bill done on maturity to bank) | | | | |
| | | | | |
| | | | | | | | |
| Ledger Jimmi’s Account |
| Dr. | | | | | | | Cr. |
| Date | Particulars | J.F. | Amount ₹ | Date | Particulars | J.F. | Amount ₹ |
| 2016 | | | | 2016 | | | |
| 01 Feb | Bank | | 5,000 | 01 Feb | Purchases | | 15,000 |
| 01 Feb | Bills Payable | | 10,000 | | | | |
| | | | | | | |
| | | 15,000 | | | | 15,000 |
| | | | | | | |
| | | | | | | | | | | | | | | |
Question - 27 : - On Jan 15, 2015, Kartar Sold goods for ₹ 30,000 to Bhagwan and drew upon him three bills of exchanges 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.
Answer - 27 : -
| Journal Entries in the Books of Kartar |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2015 | | | | | | |
| 15 Jan | Bhagwan | Dr. | | 30,000 | |
| | To Sales A/c | | | | 30,000 |
| ( Goods traded to Bhagwan) | | | | |
| | | | | |
| 15 Jan | Bills Receivable A/c | Dr. | | 10,000 | |
| | To Bhagwan A/C | | | | 10,000 |
| (Three bills of ₹ 10,000 each, received from Bhagwan) | | | |
| | | | | | |
| 15 Jan | Ratna | Dr. | | 10,000 | |
| | To Bills Receivable A/c | | | | 10,000 |
| (₹ 10,000 bill from Bhagwan endorsed to Ratna) | | | | |
| | | | | | |
| 15 Jan | Bank A/c | Dr. | | 9,850 | |
| Discount A/c | Dr. | | 150 | |
| | To Bills Receivable A/c | | | | 10,000 |
| | (B/R discounted) | | | | |
| 19 Feb | Cash A/c | Dr. | | 10,000 | |
| | To Bills Receivable A/c | | | | 10,000 |
| (First bill for one month paid by Bhagwan, on due date) | | | | |
| | | | | |
| | | | | | | | |
| Bhagwan’s Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Jan | Sales A/c | | 30,000 | 15 Jan | Bills Receivable A/c | | 30,000 |
| | | 30,000 | | | | 30,000 |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
| Ratna’s Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Jan | Bills Receivable A/c | | 10,000 | 15 Jan | Balance b/d | | 10,000 |
| | | 10,000 | | | | 10,000 |
| | | | | | | |
| Bills Receivable Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Jan | Bhagwan | | 30,000 | 15 Jan | Ratna | | 10,000 |
| | | | 15 Jan | Bank A/c | | 9,850 |
| | | | 15 Jan | Discount A/c | | 150 |
| | | | 19 Feb | Cash | | 10,000 |
| | | 30,000 | | | | 30,000 |
| | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Cash Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) | |
| 2015 | | | | 2015 | | | | |
| 19 Feb | Bills Receivable | | 10,000 | 19 Feb | Balance c/d | | 10,000 | |
| | | 10,000 | | | | 10,000 | |
| | | | | | | | |
| Bank’s Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Jan | Bills Receivable | | 9,850 | 15 Jan | Balance c/d | | 9,850 |
| | | 9,850 | | | | 9,850 |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Journal Entries in the Books of Bhagwan |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2015 | | | | | | |
| 15 Jan | Purchases A/c | Dr. | | 30,000 | |
| | To Kartar | | | | 30,000 |
| (Good bought from Kartar on credit) | | | | |
| | | | | |
| 15 Jan | Kartar | Dr. | | 30,000 | |
| | To Bills Payable A/c | | | | 30,000 |
| (Three bill ₹ 10,000 each drawn by Kartar– Accepted and returned them to Kartar) | | | |
| | | | | |
| 19 Feb | Bills Payable A/c | Dr. | | 10,000 | |
| | To Cash A/c | | | | 10,000 |
| (First bill payment completed on due date) | | | | |
| | | | | | |
| 19 Mar | Bills Payable A/c | Dr. | | 10,000 | |
| | To Bank A/c | | | | 10,000 |
| (Second bill payment completed on due date to Ratna) | | | | |
| | | | | | |
| 19 Apr | Bills Payable A/c | Dr. | | 10,000 | |
| | To Bank A/c | | | | 10,000 |
| (Third bill payment completed on due date to bank) | | | | |
| | | | | | |
| | | | | | | |
| Kartar’s Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Jan | Bills Payable A/c | | 30,000 | 15 Jan | Purchases | | 30,000 |
| | | 30,000 | | | | 30,000 |
| | | | | | | |
| | | | | | | | | | | | | | | |
| Bills Payable Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 19 Feb | Cash A/c | | 10,000 | 15 Jan | Kartar | | 30,000 |
| 19 Mar | Bank A/c | | 10,000 | | | | |
| 19 Apr | Bank A/c | | 10,000 | | | | |
| | | 30,000 | | | | 30,000 |
| | | | | | | |
| Cash Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 19 Feb | Balance b/d | | 10,000 | 19 Feb | Bills Payable A/c | | 10,000 |
| | | 10,000 | | | | 10,000 |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
| Bank’s Account |
| Dr. | | Cr. |
| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
| 2015 | | | | 2015 | | | |
| 15 Mar | Balance b/d | | 20,000 | 19 Mar | Bills Payable A/c | | 10,000 |
| | | | 19 Apr | Bills Payable A/c | | 10,000 |
| | | | | | | |
| | | 20,000 | | | | 20,000 |
| | | | | | | |
| | | | | | | | | |
Question - 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.
Answer - 28 : -
| Journal Entries in the Books of Arun |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 01 Jan | Sunil | Dr. | | 30,000 | |
| | To Sales A/c | | | | 30,000 |
| (Goods traded to Sunil) | | | | |
| | | | | |
| 01 Jan | Cash A/c | Dr. | | 14,700 | |
| Discount Allowed A/c | Dr. | | 300 | |
| | To Sunil | | | | 15,000 |
| (50% due from Sunil received and 2% Cash Discount allowed to Sunil) | | | |
| | | | | |
| 01 Jan | Bills Receivable A/c | Dr. | | 15,000 | |
| | To Sunil | | | | 15,000 |
| (Promissory note established for 20 days from Sunil) | | | |
| | | | | | |
| 23 Jan | Cash A/c | Dr. | | 15,000 | |
| | To Bills Receivable A/c | | | | 15,000 |
| (Cash received from Sunil before Maturity) | | | |
| | | | | | |
| | | | | | | | |
| Journal Entries in the Book of Sunil |
| Date | | Particulars | | L.F. | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 01 Jan | Purchases A/c | Dr. | | 30,000 | |
| | To Arun | | | | 30,000 |
| (Goods purchased from Arun) | | | | |
| | | | | |
| 01 Jan | Arun | Dr. | | 15,000 | |
| | To Cash A/c | | | | 14,700 |
| | To Discount Received A/c | | | | 300 |
| (50% amount due to Arun paid by cheque and 2% discount allowed by Arun) | | | |
| | | | | |
| 01 Jan | Arun | Dr. | | 15,000 | |
| | To Bills Payable A/c | | | | 15,000 |
| (Promissory note issued in favour of Arun for twenty days) | | | | |
| | | | | | |
| 23 Jan | Bills Payable A/c | Dr. | | 15,000 | |
| | To Cash A/c | | | | 15,000 |
| (Promissory note fullfilled one day before the maturity day) | | | | |
| | | | | | |
| | | | | | | |
Question - 29 : - Darshan sold goods for ₹ 40,000 to Varun on 8.1.2016 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.
· 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 - 29 : -
(i)
| Books of Darshan |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 08 Jan | Varun | Dr. | | 40,000 | |
| | To Sales A/c | | | | 40,000 |
| (Goods traded to Varun) | | | | |
| | | | | |
| 08 Jan | Bills Receivable A/c | Dr. | | 40,000 | |
| | To Varun | | | | 40,000 |
| (Bill of Exchange duly accepted and returned by Varun) | | | | |
| | | | | | |
| 11 Mar | Cash A/c | Dr. | | 40,000 | |
| | To Bills Receivable A/c | | | | 40,000 |
| (Payment for B/R received for B/R) | | | | |
| | | | | |
| | | | | | | |
| Books of Varun |
| Date | | Particulars | | L.F | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 08 Jan | Purchases A/c | Dr. | | 40,000 | |
| | To Darshan | | | | 40,000 |
| (Goods purchased from Darshan) | | | | |
| | | | | |
| 08 Jan | Darshan | Dr. | | 40,000 | |
| | To Bills Payable A/c | | | | 40,000 |
| (Bill of two months accepted for Darshan) | | | |
| | | | | |
| 11 Mar | Bills Payable A/c | Dr. | | 40,000 | |
| | To Cash A/c | | | | 40,000 |
| (Varun cleared his payment on the due date) | | | | |
| | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | |
(ii)
| Books of Darshan | |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 08 Jan | Varun | Dr. | | 40,000 | |
| | To Sales A/c | | | | 40,000 |
| (Goods traded to Varun) | | | | |
| | | | | |
| 08 Jan | Bills Receivable A/c | Dr. | | 40,000 | |
| | To Varun | | | | 40,000 |
| (B/R received from Varun for two months) | | | | |
| | | | | | |
| 08 Jan | 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.) | | | | |
| | | | | |
| | | | | | | | |
| | | | | | | | | | | | |
| Books of Varun |
| Date | | Particulars | | L.F. | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 08 Jan | Purchases A/c | Dr. | | 40,000 | |
| | To Darshan | | | | 40,000 |
| (Goods purchased from Darshan) | | | | |
| | | | | |
| 08 Jan | Darshan | Dr. | | 40,000 | |
| | To Bills Payable A/c | | | | 40,000 |
| (Bill of two months accepted for Darshan) | | | |
| | | | | |
| 11 Mar | Bills Payable A/c | Dr. | | 40,000 | |
| | To Bank A/c | | | | 40,000 |
| (Varun cleared his payment on the due date) | | | | |
| | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(iii)
| Books of Darshan |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 08 Jan | Varun | Dr. | | 40,000 | |
| | To Sales A/c | | | | 40,000 |
| (Goods traded to Varun) | | | | |
| | | | | |
| 08 Jan | Bills Receivable A/c | Dr. | | 40,000 | |
| | To Varun A/c | | | | 40,000 |
| (Varun’s approval received for two months) | | | | |
| | | | | | |
| 08 Jan | Suresh A/c | Dr. | | 40,000 | |
| | To Bills Receivable A/c | | | | 40,000 |
| (Varun’s approval endorsed in favour of Suresh) | | | | |
| | | | | |
| | | | | | | | |
| Books of Varun |
| Date | | Particulars | | L.F | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 08 Jan | Purchases A/c | Dr. | | 40,000 | |
| | To Darshan | | | | 40,000 |
| (Goods purchased from Darshan) | | | | |
| | | | | |
| 08 Jan | Darshan | Dr. | | 40,000 | |
| | To Bills Payable A/c | | | | 40,000 |
| (Bill drawn by Darshan accepted for two months) | | | |
| | | | | |
| 11 Mar | Bills Payable A/c | Dr. | | 40,000 | |
| | To Cash A/c | | | | 40,000 |
| (Bill paid to the holder of bill) | | | | |
| | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | |
(iv)
| Books of Darshan |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 08 Jan | Varun A/c | Dr. | | 40,000 | |
| | To Sales A/c | | | | 40,000 |
| (Goods traded to Varun) | | | | |
| | | | | |
| 08 Jan | Bills Receivable A/c | Dr. | | 40,000 | |
| | To Varun A/c | | | | 40,000 |
| (Bill of Exchange duly accepted and returned by Varun) | | | | |
| | | | | | |
| 08 Mar | Bill Sent for Collection A/c | Dr. | | 40,000 | |
| | To Bills Receivable A/c | | | | 40,000 |
| (Bill of Exchange sent for collection to bank) | | | | |
| | | | | | |
| 11 Mar | Bank A/c | Dr. | | 40,000 | |
| | To Bill Sent for Collection A/c | | | | 40,000 |
| (Bill of Exchange matured and duly collected on date of maturity) | | | | |
| | | | | |
| | | | | | | |
| Books of Varun |
| Date | | Particulars | | L.F. | Debit Amount ₹ | Credit Amount ₹ |
| 2016 | | | | | | |
| 08 Jan | Purchases A/c | Dr. | | 40,000 | |
| | To Darshan | | | | 40,000 |
| (Goods purchased from Darshan) | | | | |
| | | | | |
| 08 Jan | Darshan | Dr. | | 40,000 | |
| | To Bills Payable A/c | | | | 40,000 |
| (Bill of Exchange duly accepted and returned to Darshan) | | | |
| | | | | |
| 11 Mar | Bills Payable A/c | Dr. | | 40,000 | |
| | To Bank A/c | | | | 40,000 |
| (Bill of Exchange matured and duly cleared on date of maturity) | | | | |
| | | | | | |
| | | | | | | | |
| | | | | | | | | | | | |
Question - 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 Amount
₹
21 Dec, 2016 1,000
26 Dec, 2016 1,200
Dec.18, 2016 2,000
31 Dec, 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 25.1.2017 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.
Answer - 30 : -
| Journal Entries in the Books of Bansal Traders |
| Date | | Particulars | | L.F. | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 21 Dec | Mohan Traders | Dr. | | 900 | |
| | To Sales A/c | | | | 900 |
| (Goods traded to Mohan Traders list price ₹ 1,000 at 10% trade discount) | | | |
| | | | | |
| 2016 | | | | | | |
| 21 Dec | Bills Receivable A/c | Dr. | | 900 | |
| | To Mohan Traders | | | | 900 |
| (Promissory note established from Mohan Traders payable after 30 days) | | | |
| | | | | | |
| 2016 | | | | | | |
| 26 Dec | Mohan Traders | Dr. | | 1,080 | |
| | To Sales A/c | | | | 1,080 |
| (Goods traded to Mohan Traders list price ₹ 1,200 at 10% trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 26 Dec | Bills Receivable A/c | Dr. | | 1,080 | |
| | To Mohan Traders | | | | 1,080 |
| (Promissory note received from Mohan Traders) | | | |
| | | | | | |
| 2016 | | | | | | |
| 26 Dec | Bank A/c | Dr. | | 1,071 | |
| Discount A/c | Dr. | | 9 | |
| | To Bills Receivable A/c | | | | 1,080 |
| (Promissory note discounted from the Bank) | | | | |
| | | | | | |
| 2016 | | | | | | |
| 28 Dec | Mohan Traders A/c | Dr. | | 1,800 | |
| | To Sales A/c | | | | 1,800 |
| (Goods traded to Mohan Traders list price ₹ 2,000 at 10% trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 28 Dec | Bills Receivable A/c | Dr. | | 1,800 | |
| | To Mohan Traders A/c | | | | 1,800 |
| (Promissory note established from Mohan Traders) | | | |
| | | | | | |
| 2016 | | | | | | |
| 28 Dec | Dream Soaps A/c | Dr. | | 1,900 | |
| | To Bills Receivable A/c | | | | 1,800 |
| | To Discount Received A/c | | | | 100 |
| (Promissory note of ₹ 1,800 sent to Dream Soap in full settlement of amount due to him) | | | |
| | | | | | |
| 2016 | | | | | | |
| 31 Dec | Mohan Traders | Dr. | | 4,500 | |
| | To Sales A/c | | | | 4,500 |
| (Goods traded to Mohan trades list price ₹ 5,000 at 10% trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 31 Dec | Bills Receivable A/c | Dr. | | 4,500 | |
| | To Mohan Traders | | | | 4,500 |
| (Promissory note established from Mohan Traders for 30 days) | | | | |
| | | | | | |
| 2017 | | | | | | |
| 23 Jan | Cash A/c | Dr. | | 900 | |
| | To Bills Receivable A/c | | | | 900 |
| (Promissory note issued on Dec. 21, 2005 was met on maturity) | | | |
| | | | | | |
| 2017 | | | | | | |
| 25 Jan | 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) | | | | |
| | | | | | |
| 2017 | | | | | | |
| 02 Feb | 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 ₹ | Date | Particulars | J.F. | Amount ₹ |
| 2016 | | | | 2016 | | | |
| 21 Dec | Sales | | 900 | 21 Dec | Bills Receivable | | 900 |
| 26 Dec | Sales | | 1,080 | 26 Dec | Bills Receivable | | 1,080 |
| 28 Dec | Sales | | 1,800 | 28 Dec | Bills Receivable | | 1,800 |
| 31 Dec | Sales | | 4,500 | 31 Dec | Bills Receivable | | 4,500 |
| | | 8,280 | | | | 8,280 |
| | | | | | | |
| | | | | | | | | | | | | | | |
| Journal Entries in the Books of Mohan Trader’s | |
| Date | | Particulars | | L.F. | Debit ₹ | Credit₹ |
| 2016 | | | | | | |
| 21 Dec | Purchases A/c | Dr. | | 900 | |
| | To Bansal Traders | | | | 900 |
| (Goods purchased from Bansal Trader’s list price ₹ 1,000 at 10% trade discount) | | | |
| | | | | |
| 2016 | | | | | | |
| 21 Dec | Bansal Trader | Dr. | | 900 | |
| | To Bills Payable A/c | | | | 900 |
| (Promissory note issued Bansal Traders for ₹ 900) | | | | |
| | | | | | |
| 2016 | | | | | | |
| 26 Dec | Purchases A/c | Dr. | | 1,080 | |
| | To Bansal Traders | | | | 1,080 |
| (Goods purchased from Bansal Traders list price ₹ 1,200 at 10% Trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 26 Dec | Bansal Traders | Dr. | | 1,080 | |
| | To Bills Payable A/c | | | | 1,080 |
| (Promissory note established from Bansal Traders) | | | |
| | | | | | |
| 2016 | | | | | | |
| 28 Dec | Purchases A/c | Dr. | | 1,800 | |
| | To Bansal Traders | | | | 1,800 |
| (Goods purchased from Bansal Traders list price ₹ 2,000 at 10% trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 28 Dec | Bansal Traders | Dr. | | 1,800 | |
| | To Bills Payable A/c | | | | 1,800 |
| (Promissory note issued to Bansal Traders) | | | |
| | | | | | |
| 2016 | | | | | | |
| 31 Dec | Purchases A/c | Dr. | | 4,500 | |
| | To Bansal Traders | | | | 4,500 |
| (Goods purchased from Bansal Traders of list price ₹ 5,000 at 10% trade discount) | | | |
| | | | | | |
| 2016 | | | | | | |
| 31 Dec | Bansal Traders | Dr. | | 4,500 | |
| | To Bills Payable A/c | | | | 4,500 |
| (Promissory note issued to Bansal Traders) | | | |
| | | | | | |
| 2017 | | | | | | |
| 23 Jan | Bills Payable A/c | Dr. | | 900 | |
| | To Cash A/c | | | | 900 |
| (The first promissory note discharged on its due date) | | | | |
| | | | | | |
| 2017 | | | | | | |
| 28 Jan | Bills Payable A/c | Dr. | | 1,080 | |
| | To Bank A/c | | | | 1,080 |
| (The second promissory note discharged on its due date) | | | |
| | | | | | |
| 2017 | | | | | | |
| 30 Jan | Bills Payable A/c | Dr. | | 1,800 | |
| | To Cash A/c | | | | 1,800 |
| (The third promissory discharged by paying ₹ 1,800 to Dream Soaps) | | | |
| | | | | | |
| 2017 | | | | | | |
| 02 Feb | Bills Payable A/c | Dr. | | 4,500 | |
| | To Bank A/c | | | | 4,500 |
| (The fourth promissory note discharged by paid ₹ 4,500 to Bank) | | | | |
| | | | | |
| In the books of Mohan Traders Bansal Trader’s Account |
| Dr. | | | | | | | Cr. |
| Date | Particulars | J.F. | Amount ₹ | Date | Particulars | J.F. | Amount ₹ |
| 2016 | | | | 2016 | | | |
| 21 Dec | Bills Payable | | 900 | 21 Dec | Purchases | | 900 |
| 26 Dec | Bills Payable | | 1,080 | 26 Dec | Purchases | | 1,080 |
| 28 Dec | Bills Payable | | 1,800 | 28 Dec | Purchases | | 1,800 |
| 31 Dec | Bills Payable | | 4,500 | 31 Dec | Purchases | | 4,500 |
| | | 8,280 | | | | 8,280 |
| | | | | | | |
| | | | | | | | | | | | | | | | | | |