Cancelling an old bill and drawing a new bill is called renewal of a bill. Do you agree?

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Solution

Yes, it is called renewal of a bill. When the acceptor of a bill fails to make the payment on the due date, a new bill may be drawn on him after cancellation of the old bill.

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Q. __________________ means cancellation of old bill and drawing a new bill.

The cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called ________________.

On 1st February, 2016, Ravi sold goods to Mohan for Rs. 18,000; Rs. 3,000 were paid by Mohan immediately and for the balance he accepted three months bill drawn upon him by Ravi. On the date of maturity of the bill Mohan requested Ravi to cancel the old bill and draw a new bill upon him for a period of 2 months. He further agreed to pay interest in cash to Ravi @ 12 % per annum. Ravi agreed to Mohan's request and cancelled the old bill and drew a new bill. The new bill was met on maturity by Mohan.
Pass necessary journal entries in the books of Ravi.

Q. Cancelling the original bill and drawing a fresh acceptance is known as __________.

Q. No cancellation entry is required when a bill is renewed.

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