Question

Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan traders, who run a retail shop made the following purchase from Bansal Traders.

Date Amt. (Rs)

Dec 21, 2005 1,000

Dec 26, 2005 1,200

Dec 18, 2005 2,000

Dec 31, 2005 5,000

For all the purchase, Mohan Traders drew a promissory note in favour of Bansal Traders payable after 30 days. The promissory note for the sale of December 21, 2010, was retained by Bansal Traders with them till the date of its maturity. The promissory note drawn on 26.12.2010 was discounted by Bansal Traders from their bank at 12% per annum. The promissory note drawn on December 28, 2010, was endorsed by Bansal Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to Rs. 1,900. On 25.01.2011, Bansal Traders sent the promissory note drawn on December 31, 2010, to their bank for collection.

All the promissory notes were met by Mohan Traders. Record the necessary journal entries for the above transactions in the books of Bansal Traders and Mohan Traders and prepare Mohan Traders account in the books of Bansal Traders and Bansal Traders account in the books of Mohan Traders.

Answer 1

In the Books of Bansal Traders
Journal Entries

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{2010}& & & & & \\ \text{Dec 21}& \text{Mohan Traders A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Sales A/c}& & & & \text{900}\\ & \text{(Goods sold to Mohan Traders and allowed}10\%\text{trade discount}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 21}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Varun's A/c}& & & & \text{900}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 26}& \text{Mohan Traders A/c}& \text{Dr.}& & \text{1080}& \\ & \text{To Sales A/c}& & & & \text{1080}\\ & \text{(Payment received on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 26}& \text{Bills Receivable}& \text{Dr.}& & \text{1080}& \\ & \text{To Mohan Traders A/c}& & & & \text{1080}\\ & \text{(Acceptance received)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 26}& \text{Bank A/c}& \text{Dr.}& & \text{1,069}& \\ & \text{Discount A/c}& \text{Dr.}& & \text{11}& \\ & \text{To Bills Receivable A/c}& & & & \text{1080}\\ & \text{(Bill discounted with the bank at the rate of}12\%\text{per annum)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 28}& \text{Mohan Traders A/c}& \text{Dr.}& & \text{1,800}& \\ & \text{To Sales A/c}& & & & \text{1,800}\\ & \text{(Goods sold to Mohan Traders and}& & & & \\ & \text{allowed}10\%\text{trade discount)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 28}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{1,800}& \\ & \text{To Mohan Traders A/c}& & & & \text{1,800}\\ & \text{(Acceptance received)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 28}& \text{Dream Soaps A/c}& \text{Dr.}& & \text{1,900}& \\ & \text{To Mohan Traders A/c}& & & & \text{1,800}\\ & \text{To Discount A/c}& & & & \text{100}\\ & \text{(Acceptance received from Mohan Traders}& & & & \\ & \text{endorsed to dream soaps in full settlement of}& & & & \\ & \text{1,900 purchase)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Mohan Traders A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Sales A/c}& & & & \text{4,500}\\ & \text{(Goods sold to Mohan Traders and allowed}& & & & \\ & 10\%\text{trade discount)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Mohan Traders A/c}& & & & \text{4,500}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{2011}& & & & & \\ \text{Jan 23}& \text{Cash A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Bills Receivable A/c}& & & & \text{900}\\ & \text{(Promissory note issued on Dec 21, 2005 was met on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 25}& \text{Bill Sent for Collection A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Bills Receivable A/c}& & & & \text{4,500}\\ & \text{(Bill sent to the bank for collection)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 2}& \text{Bank A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Bill Sent for Collection A/c}& & & & \text{4,500}\\ & \text{(Bill met on maturity)}& & & & \end{array}$

$\begin{array}{cccccccc}\text{Dr.}& & & & \text{Mohan Trader's Account}& & & \text{Cr.}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ \text{2010}& & & & \text{2010}& & & \\ \text{Dec 21}& \text{Sales A/c}& & \text{900}& \text{Dec 21}& \text{Bills}& & \\ & & & & & \text{Receivable A/c}& & \text{900}\\ \text{Dec 26}& \text{Sales A/c}& & \text{1,080}& \text{Dec 26}& \text{Bills}& & \\ & & & & & \text{Receivable A/c}& & \text{1,080}\\ \text{Dec 28}& \text{Sales A/c}& & \text{1,800}& \text{Dec 28}& \text{Bills}& & \\ & & & & & \text{Receivable A/c}& & \text{1,800}\\ \text{Dec 31}& \text{Sales A/c}& & \text{4,500}& \text{Dec 31}& \text{Bills}& & \\ & & & & & \text{Receivable A/c}& & \text{4,500}\\ & & & \underset{–}{\overline{8,280}}& & & & \underset{–}{\overline{8,280}}\end{array}$


In the books of Mohan traders
Journal Entries


$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{2010}& & & & & \\ \text{Dec 21}& \text{Purchase A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Bansal Traders A/c}& & & & \text{900}\\ & \text{(Goods purchased and}10\%\text{trade discount received}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 21}& \text{Bansal Traders A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Bills Payable A/c}& & & & \text{900}\\ & \text{(Acceptance given})& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 26}& \text{Purchase A/c}& \text{Dr.}& & \text{1,080}& \\ & \text{To Bansal Traders}& & & & \text{1,080}\\ & \text{(Goods purchased and}10\%\text{trade discount received})& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 26}& \text{Bansal Traders A/c}& \text{Dr.}& & \text{1,080}& \\ & \text{To Bills Payable A/c}& & & & \text{1,080}\\ & \text{(Acceptance given)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 28}& \text{Purchases A/c}& \text{Dr.}& & \text{1,800}& \\ & \text{To Bansal Traders}& & & & \text{1,800}\\ & \text{(Goods purchased and}10\%\text{trade discount received)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 28}& \text{Bansal Traders A/c}& \text{Dr.}& & \text{1,800}& \\ & \text{To Bills Payable A/c}& & & & \text{1,800}\\ & \text{(Acceptance given)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Purchases A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Bansal Traders A/c}& & & & \text{4,500}\\ & \text{(Goods purchased from Bansal Traders)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Bansal Traders A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Bills Payable A/c}& & & & \text{4,500}\\ & \text{(Acceptance given)}& & & & \\ & \underset{–}{}& & & & \\ \text{2011}& & & & & \\ \text{Jan 23}& \text{Bills Payable A/c}& \text{Dr.}& & \text{900}& \\ & \text{To Cash A/c}& & & & \text{900}\\ & \text{(Bill paid on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 28}& \text{Bills Payable A/c}& \text{Dr}& & \text{1,080}& \\ & \text{To Bank A/c}& & & & \text{1,080}\\ & \text{(Bills paid on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 30}& \text{Bills Payable A/c}& \text{Dr.}& & \text{1,800}& \\ & \text{To Cash A/c}& & & & \text{1,080}\\ & \text{(Bills payable paid on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 2}& \text{Bills Payable A/c}& \text{Dr.}& & \text{4,500}& \\ & \text{To Bank A/c}& & & & \text{4,500}\\ & \text{(Bills payable paid on maturity)}& & & & \end{array}$

$\begin{array}{cccccccc}\text{Dr.}& & & & \text{Bansal Trader's Account}& & & \text{Cr.}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ \text{2010}& & & & \text{2010}& & & \\ \text{Dec 21}& \text{Bills Payable A/c}& & \text{900}& \text{Dec 21}& \text{Purchases A/c}& & \text{900}\\ \text{Dec 26}& \text{Bills Payable A/c}& & \text{1,080}& \text{Dec 26}& \text{Purchases A/c}& & \text{1,080}\\ \text{Dec 28}& \text{Bills Payable A/c}& & \text{1,800}& \text{Dec 28}& \text{Purchases A/c}& & \text{1,800}\\ \text{Dec 31}& \text{Bills Payable A/c}& & \text{4,500}& \text{Dec 31}& \text{Purchases A/c}& & \text{4,500}\\ & & & \underset{–}{\overline{8,280}}& & & & \underset{–}{\overline{8,280}}\end{array}$