Question

A sold goods to B on 30th October, 2016 for ₹ 14,000 and received three bills for ₹ 2,000, ₹ 4,000 and ₹ 8,000 at 2, 3 and 4 months duration respectively. He kept the first bill till maturity; endorsed the 2nd bill in favour of his creditor C and discounted the third bill on 3rd December, 2016 @18% p.a. The first and 2nd bills were duly met on maturity but the third bill was dishonoured, the bank paying ₹ 40 as noting charges. On 3rd March, 2017, B paid ₹ 3,000 and the noting charges in cash and accepted a new bill at 3 months after date for the balance plus ₹ 150 as interest. The new bill was met on maturity. Give Journal entries in the books of A and B both.

Answer 1

Books of A Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Oct. 30	B	Dr.		14,000
	To Sales A/c				14,000
	(Goods sold to B)
Oct. 30	Bills Receivable A/c (1)	Dr.		2,000
	Bills Receivable A/c (2)	Dr.		4,000
	Bills Receivable A/c (3)	Dr.		8,000
	To B				14,000
	(B accepted bills)
Oct. 30	C	Dr.		4,000
	To Bills Receivable A/c (2)				4,000
	(Bill endorsed in favour of C)
Dec. 03	Bank A/c	Dr.		7,640
	Discounting Charges A/c	Dr.		360
	To Bills Receivable A/c (3)				8,000
	(Bill discounted with the bank @ 18 p.a. for 3 months)
2017
Jan. 02	Cash A/c	Dr.		2,000
	To Bills Receivable A/c (1)				2,000
	(Bill honoured on due date)
Mar. 03	B	Dr.		8,040
	To Bank A/c				8,040
	(Bill dishonoured on due date and noting charges paid by bank)
Mar. 03	Cash A/c	Dr.		3,040
	To B				3,040
	(Cash received from B)
Mar. 03	B	Dr.		150
	To Interest A/c				150
	(Interest due to be received)
Mar. 03	Bills Receivable A/c	Dr.		5,150
	To B				5,150
	(B accepted the new bill)
June 06	Cash A/c	Dr.		5,150
	To Bills Receivable A/c				5,150
	(Bill honoured on due date)

Books of B Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Oct. 30	Purchases A/c	Dr.		14,000
	To A				14,000
	(Goods purchased from A)
Oct. 30	A	Dr.		14,000
	To Bills Payable A/c (1)				2,000
	To Bills Payable A/c (2)				4,000
	To Bills Payable A/c (3)				8,000
	(Bill drawn by A, accepted)
2017
Jan. 02	Bills Payable A/c (1)	Dr.		2,000
	To Cash A/c				2,000
	(Bill honoured on due date)
Feb. 02	Bills Payable A/c (2)	Dr.		4,000
	To Cash A/c				4,000
	(Bill honoured on due date)
Mar. 03	Bills Payable A/c (3)	Dr.		8,000
	Noting Charges A/c	Dr.		40
	To A				8,040
	(Bill dishonoured on due date and noting charges paid)
Mar. 03	A	Dr.		3,040
	To Cash A/c				3,040
	(Cash paid to A)
Mar. 03	Interest A/c	Dr.		150
	To A				150
	(Interest due to be paid)
Mar. 03	A	Dr.		5,150
	To Bills Payable A/c				5,150
	(Bill drawn by A, accepted)
June 06	Bills Payable A/c	Dr.		5,150
	To Cash A/c				5,150
	(Bill honoured on due date)

Working Note:

Calculation of Discounting Charges

$\mathrm{Discounting}\mathrm{Charges}=8,000\times \frac{18}{100}\times \frac{3}{12}=\mathrm{Rs}360$