Chapter 8 Bills of Exchange Solutions

Question - 41 : -
On Feb. 14, 2017 Rashmi sold good ₹ 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 10 Apr, 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.

Answer - 41 : -

Books of Rashmi

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

14 Feb

Alka

Dr.

7,500

To Sales A/c

7,500

(Goods tradedto Alka)

14 Feb

Cash A/c

Dr.

500

Bills Receivable A/c

Dr.

7,000

To Alka

7,500

(Cash received ₹ 500 and the bill accepted by Alka)

10 Apr

Alka

Dr.

7,000

To Bills Receivable A/c

7,000

(Alka got the bill cancelled)

10 Apr

Cash A/c

Dr.

2,000

To Alka

2,000

(Received cash from Alka)

10 Apr

Alka

Dr.

500

To Interest A/c

500

(Interest charged on the amount due from Alka)

10 Apr

Bills Receivable A/c

Dr.

5,500

To Alka

5,500

(Alka’s acceptance payable of two months received)

13 June

Cash A/c

Dr.

5,500

To Bills Receivable A/c

5,500

(Alka’s acceptance met on due date)

Ledger

Alka’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount ₹

Date

Particulars

J.F.

Amount ₹

2017

14 Feb

Sales

7,500

14 Feb

Cash

500

10 Apr

Bills Receivable

7,000

14 Feb

Bills Receivable

7,000

10 Apr

Interest

500

10 Apr

Cash

2,000

10 Apr

Bills Receivable

5,500

15,000

Books of Alka

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

14 Feb

Purchases A/c

Dr.

7,500

To Rashmi

7,500

(Goods purchased from Rahsmi)

14 Feb

Rashmi

Dr.

7,500

To Cash A/c

500

To Bills Payable A/c

7,000

(Cash paid to Rashmi ₹ 500 and a bill for ₹ 7,000

drawn by Rashmi accepted)

10 Apr

Bills Payable A/c

Dr.

7,000

To Rashmi

7,000

(Bill cancelled before maturity)

10 Apr

Rashmi

Dr.

2,000

To Cash A/c

2,000

(Cash paid to Rashmi)

10 Apr

Interest A/c

Dr.

500

To Rashmi

500

(Interest due to Rashmi)

10 Apr

Rashmi

Dr.

5,500

To Bills Payable A/c

5,500

(Rashmi’s acceptance payable after two months

accepted)

13 June

Bills Payable A/c

Dr.

5,500

To Cash A/c

5,500

(The bill met on due date)

Ledger

Rashmi’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount ₹

Date

Particulars

J.F.

Amount ₹

2017

14 Feb

Cash

500

14 Feb

Purchases

7,500

14 Feb

Bills Payable

7,000

10 Apr

Bills Payable

7,000

10 Apr

Cash

2,000

10 Apr

Interest

500

10 Apr

Bills Payable

5,500

15,000

Question - 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.

Answer - 42 : -

Books of Nikhil

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

01 Dec

Akhil

Dr.

23,000

To Sales A/c

23,000

(Goods tradedto Akhil)

01 Dec

Bills Receivable A/c

Dr.

23,000

To Akhil

23,000

(Akhil’s acceptance received)

01 Dec

Bank A/c

Dr.

22,540

Discount A/c

Dr.

460

To Bills Receivable A/c

23,000

(Akhil’s acceptance discounted at 12% p.a with bank)

2018

04 Feb

Akhil

Dr.

23,100

To Bank A/c

23,100

(Akhil’s acceptance dishonoured, bank paid

₹ 100 as noting charges)

04 Feb

Akhil

Dr.

385

To Interest A/c

385

(Interest credited on account of bill dishonoured

at 10% p.a. for two months)

04 Feb

Bills Receivable A/c

Dr.

23,485

To Akhil

23,485

(New acceptance received from Akhil for

next two months received)

01 Apr

Akhil

Dr.

23,485

To Bills Receivable A/c

23,485

(The second bill cancelled one week before

maturity)

01 Apr

Cash A/c

Dr.

10,000

To Akhil

10,000

(Cash received from Akhil)

01 Apr

Akhil

Dr.

500

To Interest A/c

500

(Interest due from Akhil for the bill)

01 Apr

Bills Receivable A/c

Dr.

13,985

To Akhil

13,985

(Bill from Akhil received)

May 04

Cash A/c

Dr.

13,985

To Bills Receivable A/c

13,985

(The third bill met on due date)

Akhil’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount ₹

Date

Particulars

J.F.

Amount ₹

2017

01 Dec

Sales

23,000

01 Dec

Bills Receivable

23,000

2018

04 Feb

Bank

23,100

04 Feb

Bills Receivable

23,485

04 Feb

Interest

385

01 Apr

Cash

10,000

01 Apr

Bills Receivable

23,485

01 Apr

Bills Receivable

13,985

01 Apr

Interest

500

70,470

Books of Akhil

Journal

Date

Particulars

L.F.

Debit

₹

Credit Amount

₹

2017

01 Dec

Purchases A/c

Dr.

23,000

To Nikhil

23,000

(Goods purchased from Nikhil)

01 Dec

Nikhil

Dr.

23,000

To Bills Payable A/c

23,000

(Bill drawn by Nikhil payable after two months

accepted)

2018

04 Feb

Bills Payable A/c

Dr.

23,000

Noting Charges A/c

Dr.

100

To Nikhil

23,100

(Bill dishonoured on due date and ₹ 100 paid by

the holder of bill)

04 Feb

Interest A/c

Dr.

385

To Nikhil A/c

385

(Interest due to Nikhil for the bill dishonoured)

04 Feb

Nikhil

Dr.

23,485

To Bills Payable A/c

23,485

(New bill accepted payable after two months)

01 Apr

Bills Payable A/c

Dr.

23,485

To Nikhil

23,485

(Bill cancelled before maturity)

01 Apr

Nikhil

Dr.

10,000

To Cash A/c

10,000

(Cash paid to Nikhil)

01 Apr

Interest A/c

Dr.

500

To Nikhil

500

(Interest due to Nikhil for bill cancellation)

01 Apr

Nikhil

Dr.

13,985

To Bills Payable A/c

13,985

(New bill accepted payable after one month)

May 04

Bills Payable A/c

Dr.

13,985

To Cash A/c

13,985

(The third bill met on maturity)

Nikhil Account

Dr.

Cr.

Date

Particulars

J.F.

Amount ₹

Date

Particulars

J.F.

Amount ₹

2017

01 Dec

Bills Payable

23,000

01 Dec

Purchases

23,000

2018

04 Feb

Bills Payable

23,485

04 Feb

Bills Payable

23,000

01 Apr

Cash

10,000

04 Feb

Noting Charge

100

01 Apr

Bills Payable

13,985

04 Feb

Interest

385

01 Apr

Bills Payable

23,485

01 Apr

Interest

500

70,470

Question - 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.

Answer - 43 : -

Books of Vibha Journal
Date		Particulars		L.F.	Debit ₹	Credit₹
2017
01 Jan	Sudha		Dr.		18,000
		To Sales A/c				18,000
	(Goods tradedto Sudha)

01 Jan	Bills Receivable A/c		Dr.		18,000
		To Sudha				18,000
	(Sudha’s acceptance received)

01 Jan	Geeta		Dr.		18,000
		To Bills Receivable A/c				18,000
	(Sudha’s acceptance endorsed in favour of Geeta)

27 Feb	Sudha		Dr.		18,000
		To Geeta				18,000
	(Sudha cancelled the bill five days before the maturity)

27 Feb	Geeta		Dr.		18,000
		To Cash A/c				18,000
	(Cash paid to Geeta)

27 Feb	Sudha				200
		To Interest A/c				200
	(Interest credited to Sudha on account of cancelling the bill )

27 Feb	Bills Receivable A/c		Dr.		18,200
		To Sudha				18,200
	(New bill received from Sudha)

02 Mar	Cash A/c		Dr.		18,200
		To Sudha				18,200
	(Sudha’s acceptance met on due date)

Question - 44 : -
Following was the position of debtor and creditor of Gautam as on 1.1.2017.
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 5.1.2017.
Jan. 04 Babu’s bill discounted for ₹ 4,750.
Jan. 08 Chanderkala sent a promissory note for ₹ 8,000 payable three months after date.
Jan. 10 Promissory note established from Chanderkala discounted for ₹ 7,900
Jan. 12 Accepted Sheiba 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.

Answer - 44 : -

Bills Receivable Book

No.

Date of Bill

2017

Date Received

2016

From whom

of Bill

Drawer

whom

received

Acceptor

Where

Term

Payable

Due date

2016

L.F.

Amount

₹

Cash

Book

Folio

Remarks

02 Jan

05 Jan

Babu

Self

Babu

2 months

05 Mar

4,800

Total

4,800

Bills Payable Book

No.

Date of Bill

2017

To Whom

Given

Drawer

Payee

Where

payable

Term

Due date

2017

Ledger

Amount

₹

Date

paid

Cash

Book

Folio

Remarks

12 Jan

Sheiba

–

2 months

15 Mar

12,000

25 Jan

Anju

–

2 months

28 Apr

5,000

Total

17,000

Cash Book

Dr.

Cr.

Date

Particulars

L.F.

Cash

₹

Bank

₹

Date

Particulars

L.F.

Cash

₹

Bank

₹

2017

04 Jan

Bills Receivable

4,750

10 Jan

Bills Receivable

7,900

29 Jan

Kiran

2,000

31 Jan

Balance c/d

2,000

12,650

2,000

12,650

2,000

12,650

Books of Gautam

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

05 Jan

Discount Allowed A/c

Dr.

200

To Babu

200

(Babu’s acceptance received and allowed him

discount ₹ 200)

04 Jan

Discount A/c

Dr.

To Bills Receivable A/c

(Babu’s acceptance discounted with a discount

charge of ₹ 50)

08 Jan

Bills Receivable A/c

Dr.

8,000

To Chanderkala

8,000

(Promissory Note from Chanderkala received)

10 Jan

Discount A/c

Dr.

100

To Bills Receivable A/c

100

(Chanderkala’s Promissory Note discounted with bank

at discount of ₹ 100)

22 Jan

Bills Receivable A/c

Dr.

14,000

To Anita

14,000

(Promissory note established from Anita)

23 Jan

Manju

Dr.

14,000

To Bills Receivable A/c

14,000

(Anita’s Promissory Note endorsed to Manju)

29 Jan

Bills Receivable A/c

Dr.

11,500

To Kiran

11,500

(Promissory Note from Kiran received)

Question - 45 : - On Jan. 01, 2017 Harsh accepted a month bill for ₹ 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 the bill. Harsh duly honoured his acceptance. Record the journal entries in the Books of Tanu and Harsh.

Answer - 45 : -

Books of Tanu

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

01 Jan

Bills Receivable A/c

Dr.

10,000

To Harsh

10,000

(Harsh’s acceptance received)

01 Jan

Bank A/c

Dr.

9,933

Discount A/c

To Bills Receivable A/c

10,000

(Harsh’s acceptance discounted at 8% p.a.

for one month)

04 Feb

Harsha

Dr.

10,000

To Bank A/c

10,000

(Harsh’s account settled by paying amount

due to Harsh through cheque)

Books of Harsh

Journal

Date

Particulars

L.F.

Debit ₹

Credit₹

2017

01 Jan

Tanu

Dr.

10,000

To Bills Payable A/c

10,000

(Bill drawn by Tanu accepted)

04 Feb

Bank A/c

Dr.

10,000

To Tanu

10,000

(Cheque received from Tanu)

04 Feb

Bills Payable A/c

Dr.

10,000

To Bank A/c

10,000

(Bill drawn by Tanu met on due date)

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