Question

A owed B ₹ 400. A accepted a Bill of Exchange at 3 months for this amount which B discounted for ₹ 380.
Give the necessary Journal entries in the books of A and B if this bill is:
(a) dishonoured on the due date;
(b) met at maturity and
(c) retired under rebate at 6% p.a. 2 months before its maturity.

Answer 1

Case (a) If the bill is dishonoured

Books of B
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		400
	To A				400
	(A’s acceptance was received)
	Bank A/c	Dr.		380
	Discount Charges A/c	Dr.		20
	To Bills Receivable A/c				400
	(A’s acceptance was discounted with bank)
	A	Dr.		400
	To Bank A/c				400
	(A’s acceptance dishonoured)

Books of A
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	B	Dr.		400
	To Bills Payable A/c				400
	(Bill drawn by A was accepted)
	Bills Payable A/c	Dr.		400
	To B				400
	(Bill drawn by B was dishonoured on maturity)

Case (b) The bills met at maturity

Books of B
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		400
	To A				400
	(A’s acceptance was received)
	Bank A/c	Dr		380
	Discount Charges A/c	Dr.		20
	To Bills Receivable A/c				400
	(A’s acceptance was discounted with bank)

Books of A
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	B	Dr.		400
	To Bills Payable A/c				400
	(Bills drawn by A was accepted)
	Bill Payable A/c	Dr.		400
	To Cash A/c				400
	(Payment made meeting the bill on maturity)

Case (c) If bill is retired under rebate at 6% p.a. 2 months before its maturity

Books of B
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		400
	To A				400
	(A’s acceptance was received)
	Cash A/c	Dr.		396
	Rebate A/c	Dr.		4
	To Bills Receivable A/c				400
	(Payment received 2 months before its maturity and gave rebate)

Working Note:

Books of A
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	B	Dr.		400
	To Bills Payable A/c				400
	(Bill drawn by B was accepted)
	Bills Payable A/c	Dr.		400
	To Cash A/c				396
	To Rebate A/c				4
	(Bill discharge before 2 months of its due date and rebate was received)