Dishonour of the Bill

Q.

Prepare Trial Balance from the following information:

Capital 1, 00, 000 ; Drawings 16, 000; Machinery 20, 000; Sales 2, 00, 000; Purchases 2, 10, 000 Sales return 20, 000; Purchases return 30, 000; Wages 40, 000; Goodwill 60, 000; Interest received 15, 000; Discount allowed 6, 000; Bank overdraft 22, 000; Bank loan 90, 000;

Debtors: Nathu 55, 000; Roopa 20, 000; Creditors: Reena 35, 000; Ganesh 25, 000 Cash 54, 000; Stock on April 01, 2008 16, 000.

Q. Prepare Bank Reconciliation Statement as on 30th September, 2016 from the following particulars:

	₹
(i) Bank Balance as per Pass Book.	10, 000
(ii) Cheque deposited into bank but no entry was passed in Cash Book.	500
(iii) Cheque received and entered in Cash Book but not sent to bank.	1, 200
(iv) Insurance premium paid directly by the bank.	800
(v) Bank charges entered twice in the Cash Book.	20
(vi) Cheque received entered twice in Cash Book.	1, 000
(vii) Bill discounted dishonoured not recorded in the cash book.	5, 000

Q.

What is meant by dishonour of a bill of exchange?

Q. Dishonor of a bill is recorded in account.

1. cash
2. sales
3. purchases
4. bills receivable

Q. Rectify the following errors by means of Journal entries:
(i) A cheque of ₹ 5, 000 received from Ashish was dishonoured and was debited to Discount Account.
(ii) Purchases of ₹ 540 from Ramneek was written in Sales Book but was correctly posted to correct side to Ramneek's Account.
(iii) Salary paid to Miss Yugakshi ₹ 1, 000 was debited to her Personal Account as ₹ 900.
(iv) Furniture costing ₹ 500, purchased from Jyoti, was wrongly entered in Purchases Book as ₹ 450.

Q. Pass the rectifying entries for the following
(i) Sales of goods ₹ 6, 000 to Madan were recorded as ₹ 600 in the Sales Book.
(ii) Credit purchase of goods from Mohan amounting to ₹ 2, 000 has been wrongly passed through the Sales Book.
(iii) Return of goods worth ₹ 500 by a customer was entered in ‘Purchases Return Book’.
(iv) Cheque of ₹ 400 received from Ranjan was dishonoured and debited to the Discount Account.
(v) Bill for ₹ 820 received from Ramesh for repair of machinery was entered in the Purchases Book as ₹ 720.

Q.

Give Journal entries for the following:

(i) Received only 60 paise in rupee from official receiver of Mr. Vinod who owed Rs. 10, 000.

(ii) Paid Rs. 7, 300 to Viond in full settlement of his acocunt of Rs. 7, 500.

(iii) Received cash from Vinod for a bad debt written off last year Rs. 500.

Q.

Which of the account is debited in case of dishonour of bill on the due date.

1. Bank account

2. Bills receivable account

3. Drawee account

4. Cash account

Q. From the following information, prepare Profit and Loss Account for the year ended 31st March, 2018:

	₹		₹
Gross Profit	1, 20, 000	Discount Received	6, 000
Rent	5, 000	Printing and Stationery	4, 000
Salary	35, 000	Legal Charges	10, 000
Commission Paid	19, 000	Bad Debts	2, 000
Interest on Loan	5, 000	Loss by Fire	6, 000
Advertisement	8, 000	Depreciation	4, 000
Interest Received	8, 000

Q.

(a) Give necessary Journal entries to rectify the following errors:

(i) Rent received : 1, 000 was wrongly entered as commission received : 1, 000 in the Cash Book.

(ii) 2, 500 paid for rent, has been wrongly debited to Interest Account.

(iii) An amount of 8, 000 received on account of interest, was credited wrongly to Commission Account.

(iv) 35, 000 paid for the purchase of a motor cycle to proprietor has been charged to Miscellaneous Expenses Account.

(v) Contractor's Bill of 27, 500 for expansion of building was wrongly debited to Repairs Account.

(vi) 5, 000 paid in installment to an injured worker for compensation. The worker's compensation claim was debited to Wages Account.

(b) Goods worth : 10, 000 returned by Keshwari were taken into stock but the transaction was not recorded by Mr. Shaad (accountant) in the books of accounts as he was doing some of his personal work and left the company after office hours, not caring for the transaction to be entered in the books of accounts.

(i) Identify the value missing in the above case.

(ii) Rectify the error.

Or

Write the following transactions in Cash Book with Discount and Bank Columns:

Jan. 1 Opening balance of cash : 2, 00, 000.

Jan. 3 He pays : 1, 80, 000 into Bank's Current A/c.

Jan. 4 He receives cheque of =6, 000 from Kirti & Co., on account.

Jan. 7 He pays into Bank Kirti & Co's cheque for : 6, 000.

Jan. 10 He pays Ratan & Co., by cheque : 3, 300 and is allowed discount : 200.

Jan. 12 Tripathi & Co., pay into his Bank AIc: 4, 750.

Jan. 15 He receives cheque for : 4, 500 from Warsi and allows him discount : 350.

Jan. 20 He receives cash : 750 and cheque : 1, 000 for Cash Sales.

Jan. 25 He pays into Bank : 10, 000.

Jan. 27 He pays John & Co. : 3, 750 in cash and is allowed discount : 350.

Jan. 30 He pays sundry expenses in cash : 500.

Jan. 31 He pays office rent by cheque : 2, 000.

Jan. 31 He pays staff salaries by cheque : 3, 000.

Jan. 31 He draws a cheque for personal use : 2, 500.

Jan. 31 He pays Jagpal by cheque for commission : 3, 000.

Q.

A Credit Sale Of Goods To Ram Should Be Debited To (C) Goods Account (D) Purchase Account

1. Rams Account

2. Sales Account

3. Goods Account

4. Purchase Account

Q.

From the following trial balance prepare trading account, profit and loss account, and balance sheet for the year ended 31st December, 2016.

$\begin{array}{cccc}\text{Account Title}& \text{Amt. (Rs.)}& \text{Account Title}& \text{Amt. (Rs.)}\\ \text{Capital}& 10,00,000& \text{Sundry Creditors}& 97,000\\ \text{Life Insurance Premium}& 8,000& \text{Sales}& 12,00,000\\ \text{Plant and Machinery}& 2,50,000& \text{Returns Outwards}& 10,000\\ \text{Stock in the Beginning}& 1,50,000& \text{Discount (Dr.)}& 8,000\\ \text{Purchases}& 8,72,000& \text{Discount (Cr.)}& 12,000\\ \text{Return Inwards}& 20,000& \text{Rent or Premises Sublet}& 10,000\\ \text{Sundry Debtors}& 2,10,000& \text{Lighting}& 5,000\\ \text{Furniture}& 92,000& \text{Salaries}& 2,13,000\\ \text{Freehold Property}& 4,00,000& \text{Cash}& 1,58,000\\ \text{Freight and Duty}& 20,000& \text{Loan from Bank at}10\%\text{per annum on}& \\ \text{Carriage Inwards}& 8,000& \mathrm{1.1.2016}& 1,00,000\\ \text{Carriage Outwards}& 2,000& \text{Bank Interest (Dr.)}& 9,000\\ \text{Trade Expenses}& 4,000& & \end{array}$

Adjustments:

(i) Stock on 31st December, 2016 was valued at Rs. 3, 00, 000.

(ii) Stock for Rs. 50, 000 was burnt by fire on 25th December, 2016 and the Insurance company admitted the claim of Rs. 30, 000.

(iii) Good worth Rs. 15, 000 were distributed as free samples, goods worth Rs. 12, 000 were used for personal purposes by the proprietor and goods worth Rs. 8, 000 were given away as charity.

(iv) Use of goods in business worth Rs. 20, 000.

(v) Machine worth Rs. 50, 000 burnt by fire on 30th December, 2016 which was not insured.

Q.

A bill of Rs.5000 is discounted with the banker for Rs.4750. The bill is dishonored at maturity. The drawee pays 60% of his acceptance. What is the amount of bad debts?

1. Rs 1000

2. Rs 3000

3. Rs 1500

4. Rs 2000

Q. When a bill discounted with bank gets dishonoured, will pay the noting charges.

1. drawer
2. drawee
3. endorser
4. bank

Q.

Fees paid in cash to Notary Pubilc is charged by :

1. Drawer

2. None of the above

3. Holder of the bill

4. Drawee

Q.

On 15th January, 2016, Sachin sold goods for Rs. 30, 000 to Narain and drew upon latter a bill for the same amount payable after 3 months. The bill was accepted by Narain. The bill was discounted by Sachin from his bank for Rs. 29.250 on 31st January, 2016. On maturity, the bill was dishonoured. He further agreed to pay Rs. 10, 500 in cash including Rs. 500 interest and accept a new bill for 2 months for the remaining Rs. 20, 000. The new bill was endorsed by Sachin in favour of his creditor Kapil for debt of Rs. 20, 000. The new bill was duly met by Narain on maturity. Give the journal entries in the books of Sachin.

Q.

Trial balance of Raju showed an excess debit of Rs. 10, 000. He put the difference to suspense account and discovered the following errors.
(i) Depreciation written-off the furniture Rs. 6, 000 was not posted to furniture account.
(ii) Credit sales to Rupam Rs. 10, 000 were recorded as Rs. 7, 000.
(iii) Purchases book undercast by Rs. 2, 000.
(iv) Cash sales to Rana Rs. 5, 000 were not posted.
(v) Old machinery sold for Rs. 7, 000 was credited to sales account
(vi) Discount received Rs. 800 from Karan on paying cash to him was not posted.
Rectify the errors and prepare suspense account.

Q. Ram owes ₹ 2, 000 to Mohan on 1st January, 2018. On this date, he accepted a draft for the amount for 3 months. Mohan got the bill discounted at his bank @ 6% p.a. On the due date, the bill was dishonured, nothing charges ₹ 20. Ram agreed to pay ₹ 520 immediately and accept another bill for the remaining amount for 3 months together with interest at 9% p.a. This bill was met on the due tate. Give the Journal entries in the books of both the parties.

Q.

Give journal entries to rectify the following errors assuming that suspense account had been opened.
(i) Goods distributed as free sample Rs. 5, 000 were not recorded in the books.
(ii) Goods withdrawn for personal use by the proprietor Rs. 2, 000 were not recorded in the books.
(iii) Bills receivable received from a debtor Rs. 6, 000 was not posted to his account.
(iv) Total of return inwards book Rs. 1, 200 was posted to return outwards account.
(v) Discount allowed to Reema Rs. 700 on receiving cash from her was recorded in the books as Rs. 70.

Q. X sells goods for ₹ 40, 000 to Y on 1st January, 2012 and on the same day draws a bill on Y at three months for the amount. Y accepts it and returns it to X, who discounted it on 4th January, 2018 with his bank at 6% p.a. The acceptance is dishonoured on the due date and the noting charges were paid by bank being ₹ 200.
On 4th April, 2018, Y accepts a new bill at three months for the amount then due to X together with interest at 12% p.a.
Make Journal entries to record these transactions in the books of X.

Q. A bill for ₹ 1, 000 is drawn by A on B and accepted by the latter payable at the New Bank of India. Show what entries should be passed in the books of A under each of the following circumstances:
(a) If A retained the bill till the due date and then realized it on maturity.
(b) If A discounted it with his bankers for ₹ 950.
(c) If A endorsed it to his creditor C in full settlement of his debt.
(d) If A sent it to his bankers for collection.
Also, give the necessary entries in each of the cases if the bill is dishonoured.

Q. Journalise the following transactions:

2018 April 1 April 2 April 4 April 5 April 10 April 14 April 16 April 17

​Paid into bank ₹ 21, 000 for opening a Current Account. Withdrew for private expenses ₹ 5, 000. Withdrew from bank ₹ 3, 000. Place on Fixed Deposit Account at Bank by transfer from Current Account ₹ 5, 000. ​Received a cheque from Shiv & Co. to whom goods were sold for ₹ 3, 000 last year. Allowed him 2% discount. Shiv & Co.'s cheque deposited into bank. Shiv & Co.'s cheque dishonoured (Bank charges ₹ 10) Shiv & Co. settled his account by means of a cheque for ₹ 3, 000, ₹ 40 being interest charged.

Q.

What are the golden rules of accounting?

Q. Amar sells goods to Bhola for ₹ 10, 000 and draws upon him a bill for the amount payable 3 months after date. The bill is accepted by Bhola. Amar discounts the bill with his bankers at a discount of ₹ 150 inclusive of all charges. Bhola fails to meet this bill on maturity. Amar pays off his banker and his expenses amounting to ₹ 100. Bhola gives a fresh bill, 2 months' date to Amar for ₹ 10, 250, which he met at maturity.
Show the necessary Journal entries in Amar's books.

Q. On 1st January, 2008, A sold goods to B for ₹ 1, 00, 000 received ₹ 25, 000 in cash and drew two bills, first ₹ 45, 000 and second for ₹ 30, 000 of two months each. Both bills were duly accepted by B. First bill was endorsed to C in settlement of his account of ₹ 45, 000 and second bill was discounted from the bank at the rate of 12% p.a. On the due date of these bills, both bills were dishonoured, C has paid ₹ 100 and bank has paid ₹ 80 as noting charges.
Pass Journal entries in the books of A, B and C.

Q.

Amount of noting charges is actual expense of ?

1. Drawee

2. Drawer

3. Banker

4. Endorsee

Q.

Following is the Trial Balance of Komal Jaggi as on 31st March 2010 Prepare Trading and Profit and Loss Account for the year ended 31st March, 2010 and Balance Sheet as on that date.

Trial Balance as on 31st March, 2010
Particulars	Amount Rs	Particulars	Amount Rs
Stock on 1-4-2009 Purchases Return inward Wages Insurance Salaries Rent & Taxes Bad debts Discount allowed Machinery Buildings Sundry debtors Advertisement Carriage inward Cash in hand Cash at Bank Office expenses Drawings	50, 000 1, 19, 000 3, 000 7, 750 1, 500 9, 400 5, 000 1, 000 2, 000 25, 000 55, 000 70, 000 10, 000 2, 350 6, 000 8, 000 2, 000 4, 000	Sales Return outward Discount received Sundry Creditors Capital Bank Loan Bills Payable	1, 90, 000 1, 500 2, 500 52, 000 1, 00, 000 30, 000 5, 000
Total	3, 81, 000	Total	3, 81, 000

Adjustment:

1) On 31st March 2010 the stock was valued Rs 30, 000

2) Outstanding Wages Rs 1, 250 and Rent Rs 1, 000

3) Insurance was paid for the year ending 30th Sep. 2010

4) Depreciate Machinery 10% and Buildings by 4% p.a.

5) Provide R.D.D. at 5% on Sundry Debtors.

Q.

On November 1, 2010, Sonia drawn a bill on Sunny for Rs. 15, 000 for 3 months for mutual accommodation. Sunny accepts the bill and return it to Sonia. Sonia discounted the same with his bankers at the rate of 6% per annum. The proceeds are shared between Sonia and Sunny in proportion of 2/3rd and 1/3rd respectively. On the due date, Sonia remits his proportion to Sunny who fails to met the bill and as a result Sonia has to meet it. Sunny give a fresh acceptance for the amount due to Sonia plus interest of Rs. 100 Sunny meet his second acceptance on due date.

Record the necessary Journal entries in the books of Sonia and Sunny.

Q.

If A draws the bill on B, B accepts the bill and returned the bill back to A. A endorses the bill in favour of C. In whose books of Accounts the adjustment is required when bill is dishonoured?

1. B and C

2. A, B and C

3. A and B

4. A and C

Q.

Prepare a simple cash book from the following information:

2011 Jan.
1.	Mr. Ashvin started business with cash Rs 95, 000.
3.	Purchased furniture for office use Rs 17, 500.
4.	Purchased goods worth Rs 11, 000.
7.	Purchased machinery for Rs 15, 000.
10.	Sold goods of Rs 14, 300 to Sanket Traders for cash.
13.	Received from Suyash Rs 9, 000.
15.	Withdrew Rs 2, 500 from business for personal use.
19.	Borrowed loan from Mr. Trilok Rs 40, 000.
22.	Purchased goods of Rs 14, 000 at 5% trade discount.
26.	Paid salary to staff Rs 18, 000.
29.	Paid carriage on goods purchased Rs 1, 400.
30.	Paid electricity bill Rs 4, 980.
31	Deposited into bank Rs 7, 000.