Question

A sold goods for ₹ 40,000 to B on Jan. 01, 2017. He drew upon B a bill of exchange for the same amount payable after 1 month. B accepted the bill and sent it back to A. A discounted the bill immediately with his bank @ 9% p.a. On the due date B dishonoured the bill of exchange and the bank paid ₹ 200 as noting charges. B requested A to draw a new bill upon him with interest @ 12% p.a. which he agreed. The new bill was payable after 1 month. One week before the maturity of the second bill B requested A to cancel the second bill. He further requested to accept ₹ 15,000 in cash immediately and draw a third bill upon him including interest of ₹ 1,000. A agreed to B's request. The third bill was payable after one month. B met the third bill on its maturity. Record the necessary journal entries in the books of A and B and also prepare B's account in the books of A and A's account in the books of B.

Answer 1

Books of A Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2017
Jan. 01	B	Dr.		40,000
	To Sales A/c				40,000
	(Goods sold to B)
Jan. 01	Bills Receivable A/c	Dr.		40,000
	To B				40,000
	(B Accepted the bill)
Jan. 01	Bank A/c	Dr.		39,700
	Discount Charges A/c	Dr.		300
	To Bills Receivable A/c				40,000
	(Bill discounted with the bank @ 9% p.a. for 1 month)
Feb. 04	B	Dr.		40,200
	To Bank A/c				40,200
	(Bill dishonoured on due and noting charges paid)
Feb. 04	B	Dr.		402
	To Interest A/c				402
	(Interest due to be received)
Feb. 04	Bills Receivable A/c	Dr.		40,602
	To B				40,602
	(B accepted the new bill)
Feb. 28	B	Dr.		40,602
	To Bills Receivable A/c				40,602
	(New bill dishonoured)
Feb. 28	B	Dr.		1,000
	To Interest A/c				1,000
	(Interest due to be received)
Feb. 28	Cash A/c	Dr.		15,000
	To B				15,000
	(Cash received from B)
Feb. 28	Bills Receivable A/c	Dr.		26,602
	To B				26,602
	(B accepted the new bill)
Mar. 31	Cash A/c	Dr.		26,602
	To Bills Receivable A/c				26,602
	(Bill honoured on due date)

B’s Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2017					2017
Jan. 01		Sales A/c		40,000	Jan. 01	Bills Receivable A/c		40,000
Feb. 04		Bank A/c		40,200	Feb. 04	Bills Receivable A/c		40,602
Feb. 04		Interest A/c		402	Feb. 28	Cash A/c		15,000
Feb. 28		Bills Receivable A/c		40,602	Feb. 28	Bills Receivable A/c		26,602
Feb. 28		Interest A/c		1,000
				1,22,204				1,22,204

Books of B Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2017
Jan. 01	Purchases A/c	Dr.		40,000
	To A				40,000
	(Goods purchased from A)
Jan. 01	A	Dr.		40,000
	To Bills Payable A/c				40,000
	(Bill drawn by A, accepted)
Feb. 04	Bills Payable A/c	Dr.		40,000
	Noting Charges A/c	Dr.		200
	To A				40,200
	(Bill dishonoured on due date and noting charges paid)
Feb. 04	Interest A/c	Dr.		402
	To A				402
	(Interest due to be paid)
Feb. 04	A	Dr.		40,602
	To Bills Payable A/c				40,602
	(New bill drawn by A, accepted)
Feb. 28	Bills Payable A/c	Dr.		40,602
	To A				40,602
	(New bill dishonoured)
Feb. 28	Interest A/c	Dr.		1,000
	To A				1,000
	(Interest due to be paid)
Feb. 28	A	Dr.		15,000
	To Cash A/c				15,000
	(Cash paid to A)
Feb. 28	A			26,602
	To Bills Payable A/c				26,602
	(New bill drawn by A, accepted)
Mar. 31	Bills Payable A/c	Dr.		26,602
	To Cash A/c				26,602
	(Bill honoured on due date)

A’s Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2017					2017
Jan. 01		Bills Payable A/c		40,000	Jan. 01	Purchases A/c		40,000
Feb. 04		Bills Payable A/c		40,602	Jan. 01	Bills Payable A/c		40,000
Feb. 28		Cash A/c		15,000	Feb. 04	Noting Charges A/c		200
Feb. 28		Bills Payable A/c		26,602	Feb. 04	Interest A/c		402
					Feb. 28	Bills Payable A/c		40,602
					Feb. 28	Interest A/c		1,000
				1,22,204				1,22,204

Working Notes:

WN1 Calculation of Discounting Charges

$\mathrm{Discounting}\mathrm{Charges}=40,000\times \frac{9}{100}\times \frac{1}{12}=\mathrm{Rs}300$

WN2 Calculation of amount of Interest

$\mathrm{Amount}\mathrm{of}\mathrm{Interest}=40,200\times \frac{12}{100}\times \frac{1}{12}=\mathrm{Rs}402$