Question

A sold goods to B on 1st September, 2017 for ₹ 16,000. B immediately accepted a 3 months bill. On the due date, B requested that the bill be renewed for a further period of 2 months. A agreed provided interest at 9% p.a. was paid immediately in cash. To this B was agreeable. The second bill was met on the due date. Give the Journal entries in the books of A.

Answer 1

Books of A Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Sep.01	B	Dr.		16,000
	To Sales A/c				16,000
	(Goods were sold to B)
Sep.01	Bills Receivable A/c	Dr.		16,000
	To B				16,000
	(B’s acceptance was received)
Dec.04	B	Dr.		16,000
	To Bills Receivable A/c				16,000
	(B’s acceptance was cancelled)
Dec.04	B	Dr.		240
	To Interest A/c				240
	(Interest due from at 9% for 2 months on the amount due)
	Working Note: Interest = 16,000 × 9% × 2/12 = Rs 240
Dec.04	Cash A/c	Dr.		240
	To Interest A/c				240
	(Amount for interest ware received from B)
Dec.04	Bills Receivable A/c	Dr.		16,000
	To B				16,000
	(B accepted a new bill)
2018
Feb.07	Cash A/c	Dr.		16,000
	To Bills Receivable A/c				16,000
	(Payment received on honouring of the bill)

Books of B
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Sep.01	Purchases A/c	Dr.		16,000
	To A				16,000
	(Goods were bought from A)
Sep.01	A	Dr.		16,000
	To Bills Payable A/c				16,000
	(Bills drawn by A was accepted)
Dec.04	Bill Payable A/c	Dr.		16,000
	To A				16,000
	(Bill got cancelled due to inability to pay)
Dec.04	Interest A/c	Dr.		240
	To A				240
	(Interest due to A at 9% p.a. for 2 months)
Dec.04	A	Dr.		240
	To Cash A/c				240
	(Payment for interest to A)
Dec.04	A	Dr.		16,000
	To Bills Payable A/c				16,000
	(New bill drawn by A was accepted)
2018
Feb.04	Bills Payable A/c	Dr.		16,000
	To Cash A/c				16,000
	(Payment of the bill made on due date)