Question

Darshan sold goods for Rs. 40,000 to Varun on 8.1.2011 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date, the bill was met by Varun.

Record the necessary Journal entries in the books of Darshan and Varun in the following circumstances.

• When the bill was retained by Darshan till the date of its maturity.
• When Darshan immediately discounted the bill at the rate of 6% Per annum with his bank.
• When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.
• When three days before its maturity, the bill was sent by Darshan to his bank for collection.

Answer 1

In the Books of Darshan
Journal Entries
When the bill was retained by Darshan till the date of its maturity

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{2011}& & & & & \\ \text{Jan 1}& \text{Varun's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Sales}& & & & \text{40,000}\\ & \text{(Goods sold to Varun)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Varun's}& & & & \text{40,000}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 11}& \text{Cash A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bills Receivable A/c}& & & & \text{40,000}\\ & \text{(Payment received on maturity)}& & & & \end{array}$

When Darshan immediately discounted the bill at the rate of 6% per annum with his bank

$\begin{array}{cccccc}\text{Jan 8}& \text{Varun's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Sales A/c}& & & & \text{40,000}\\ & \text{(Goods sold to Varun)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Varun}& & & & \text{40,000}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Bank A/c}& \text{Dr.}& & \text{39,600}& \\ & \text{Discount A/c}& \text{Dr.}& & \text{400}& \\ & \text{To Bills Receivable A/c}& & & & \text{40,000}\\ & \text{(Bill discounted with the bank at the rate of}6\%\text{per annum}& & & & \end{array}$

When the bill was endorsed immediately by Darshan in favour of his creditor Suresh

$\begin{array}{cccccc}\text{Jan 8}& \text{Varun's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Sales A/c}& & & & \text{40,000}\\ & \text{(Goods sold to Varun)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Varun's}& & & & \text{40,000}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Suresh's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bills Receivable A/c}& & & & \text{40,000}\\ & \text{(Bill endorsed to Suresh)}& & & & \end{array}$

When three days before its maturity, the bill was sent by Darshan to his bank for collection

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{Jan 8}& \text{Varun's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Sales A/c}& & & & \text{40,000}\\ & \text{(Goods sold to Varun)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Bills Receivable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Varun's A/c}& & & & \text{40,000}\\ & \text{(Acceptance received})& & & & \\ & \underset{–}{}& & & & \\ \text{March 8}& \text{Bill Sent for Collection A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bills Receivable A/c}& & & & \text{40,000}\\ & \text{(Bill sent for collection)}& & & & \\ & \underset{–}{}& & & & \\ \text{March 8}& \text{Bank A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bill Sent for Collection A/c}& & & & \text{40,000}\\ & \text{(Bill met on maturity}& & & & \end{array}$

In the Books of Varun
Journal Entries

When the bill was retained by Darshan till the date of its maturity

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{2011}& & & & & \\ \text{Jan 8}& \text{Purchases A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Darshan's A/c}& & & & \text{40,000}\\ & \text{(Goods purchased)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Darshan's A/c}& \text{Dr}& & \text{40,000}& \\ & \text{To Bills Payable A/c}& & & & \text{40,000}\\ & \text{(Acceptance given})& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 11}& \text{Bills Payable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Cash A/c}& & & & \text{40,000}\\ & \text{(Bills met on maturity)}& & & & \end{array}$

When Darshan immediatly discounted the bill at the rate of 6% per annum with his bank

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{Jan 8}& \text{Purchases A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Darshan's A/c}& & & & \text{40,000}\\ & \text{(Goods purchased from Darshan on credit)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Darshan's A/c}& \text{Dr}& & \text{40,000}& \\ & \text{To Bills Payable A/c}& & & & \text{40,000}\\ & \text{(Acceptance given})& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 11}& \text{Bills Payable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bank A/c}& & & & \text{40,000}\\ & \text{(Bill met on maturity)}& & & & \end{array}$

When the bill was endorsed by Darshan immediately favour of his creditor Suresh

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{Jan 8}& \text{Purchases A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Darshan's A/c}& & & & \text{40,000}\\ & \text{(Goods purchased)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Darshan's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bills Payable A/c}& & & & \text{40,000}\\ & \text{(Being acceptance given})& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 11}& \text{Bills Payable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bank A/c}& & & & \text{40,000}\\ & \text{(Payment made on maturity)}& & & & \end{array}$

When three days before its maturity, the bill was sent by Darshan to his bank for collection

$\begin{array}{cccccc}\text{Jan 8}& \text{Purchases A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Darshan's A/c}& & & & \text{40,000}\\ & \text{(Goods purchased)}& & & & \\ & \underset{–}{}& & & & \\ \text{Jan 8}& \text{Darshan's A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Bills Payable A/c}& & & & \text{40,000}\\ & \text{(Acceptance given})& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 11}& \text{Bills Payable A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Cash A/c}& & & & \text{40,000}\\ & \text{(Payment made on maturity)}& & & & \end{array}$