Question

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.

Answer 1

(a)

Books of A
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		1,000
	To B				1,000
	(B’s acceptance was received)
	On honouring of the bill
	Bank A/c	Dr.		1,000
	To Bills Receivable A/c				1,000
	(B’s acceptance honoured)
	On dishonour of the bill
	B	Dr.		1,000
	To Bills Receivable A/c				1,000
	(B’s acceptance dishonoured)

(b)

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		1,000
	To B				1,000
	(Bills Receivable received from B)
	Bank A/c	Dr.		950
	Discount Charges A/c	Dr.		50
	To Bills Receivable A/c				1,000
	(Bill acceptance discounted with bank)
	On dishonour of the bill
	B	Dr.		1,000
	To Bank A/c				1,000
	(B’s acceptance dishonoured)

(c)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		1,000
	To B				1,000
	(B’s acceptance was received)
	C	Dr.		1,000
	To Bills Receivable A/c				1,000
	(B’s acceptance endorsed in favour of C)
	On dishonour of the bill			1,000
	B	Dr.			1,000
	To C
	(B’s acceptance which had transferred to C now became dishonoured)

(d)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		1,000
	To B				1,000
	(B’s acceptance was received)
	Bills Sent to Bank for Collection A/c	Dr.		1,000
	To Bills Receivable A/c				1,000
	(Bill Sent to bank for collection)
	On dishonour of Bill
	B	Dr.		1,000
	To Bill Sent to Bank for Collection A/c				1,000
	(B’s acceptance dishonoured)