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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.


Solution

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

DateParticularsL.F.Amt. (Dr.)Amt. (Cr.)2011Jan 1Varun's A/cDr.40,000 To Sales 40,000(Goods sold to Varun)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Bills Receivable A/cDr.40,000 To Varun's40,000(Acceptance received)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Mar 11Cash A/cDr.40,000 To Bills Receivable A/c 40,000(Payment received on maturity)


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

Jan 8Varun's A/cDr.40,000 To Sales A/c40,000(Goods sold to Varun)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Bills Receivable A/cDr.40,000 To Varun40,000(Acceptance received)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Bank A/cDr.39,600Discount A/c Dr.400 To Bills Receivable A/c40,000(Bill discounted with the bank at the rate of 6% per annum


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

Jan 8Varun's A/cDr.40,000 To Sales A/c40,000(Goods sold to Varun)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Bills Receivable A/cDr.40,000 To Varun's40,000(Acceptance received)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Suresh's A/cDr.40,000 To Bills Receivable A/c40,000(Bill endorsed to Suresh)


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

DateParticularsL.F.Amt. (Dr.)Amt. (Cr.)Jan 8Varun's A/cDr.40,000 To Sales A/c40,000(Goods sold to Varun)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Bills Receivable A/cDr.40,000 To Varun's A/c40,000(Acceptance received)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––March 8Bill Sent for Collection A/cDr.40,000 To Bills Receivable A/c40,000(Bill sent for collection)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––March 8Bank A/cDr.40,000 To Bill Sent for Collection A/c40,000(Bill met on maturity

                         In the Books of Varun
                               Journal Entries

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

DateParticularsL.F.Amt. (Dr.)Amt. (Cr.)2011Jan 8Purchases A/cDr.40,000 To Darshan's A/c40,000(Goods purchased)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Darshan's A/cDr40,000 To Bills Payable A/c40,000(Acceptance given)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Mar 11Bills Payable A/cDr.40,000 To Cash A/c40,000(Bills met on maturity)

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

DateParticularsL.F.Amt. (Dr.)Amt. (Cr.)Jan 8Purchases A/cDr.40,000 To Darshan's A/c40,000(Goods purchased from Darshan on credit)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Darshan's A/cDr40,000 To Bills Payable A/c40,000(Acceptance given)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Mar 11Bills Payable A/cDr.40,000 To Bank A/c40,000(Bill met on maturity)

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

DateParticularsL.F.Amt. (Dr.)Amt. (Cr.)Jan 8Purchases A/cDr.40,000 To Darshan's A/c40,000(Goods purchased)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Darshan's A/cDr.40,000 To Bills Payable A/c40,000(Being acceptance given)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Mar 11Bills Payable A/cDr.40,000 To Bank A/c40,000(Payment made on maturity)

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

Jan 8Purchases A/cDr.40,000 To Darshan's A/c40,000(Goods purchased)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Jan 8Darshan's A/cDr.40,000 To Bills Payable A/c40,000(Acceptance given)                                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Mar 11Bills Payable A/cDr.40,000 To Cash A/c40,000(Payment made on maturity)

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