Question

Darshan sold goods for Rs 40,000 to Varun on 8.1.2016 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 @ 6% p.a. 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

Case (i): When the bill was retained by Darshan till the date of its maturity

Journal Entries in the Books of Darshan
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Varun			Dr.		40,000
			To Sales A/c				40,000
	(Goods sold to Varun)
Jan.08	Bills Receivable A/c			Dr.		40,000
		To Varun					40,000
	(Varun's acceptance received for two months)
Mar.11	Cash A/c			Dr.		40,000
		To Bills Receivable A/c					40,000
	(Payment for B/R received for B/R)

Journal Entries in the Books of Varun
Date		Particulars				L.F	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)
Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill of two months accepted for Darshan)
Mar.11	Bills Payable A/c				Dr.		40,000
		To Cash A/c						40,000
	(Varun cleared his acceptance on the due date)

Case (ii): When Darshan immediately discounted the bill @ 6% p.a. with the bank.

Journal Entries in the Books of Darshan

Date

Particulars

L.F.

Debit Amount Rs

Credit Amount Rs

2016

Jan.08

Varun

Dr.

40,000

To Sales A/c

40,000

(Goods sold to Varun)

Jan.08

Bills Receivable A/c

Dr.

40,000

To Varun

40,000

(B/R received from Varun for two months)

Jan.08

Bank A/c

Dr.

39,600

Discount A/c

Dr.

400

To Bills Receivable A/c

40,000

(B/R discounted from bank @ 6 p.a.)

Journal Entries in the Books of Varun
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)
Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill of two months accepted for Darshan)
Mar.11	Bills Payable A/c				Dr.		40,000
		To Bank A/c						40,000
	(Varun cleared his acceptance on the due date)

Case (iii): When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

Journal Entries in the Books of Darshan
Date			Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Varun				Dr.		40,000
		To Sales A/c						40,000
	(Goods sold to Varun)
Jan.08	Bills Receivable A/c				Dr.		40,000
		To Varun A/c						40,000
	(Varun's acceptance received for two months)
Jan.08	Suresh A/c				Dr.		40,000
		To Bills Receivable A/c						40,000
	(Varun's acceptance endorsed in favour of Suresh)

Journal Entries in the Books of Varun
Date		Particulars				L.F	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)
Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill drawn by Darshan accepted for two months)
Mar.11	Bills Payable A/c				Dr.		40,000
		To Cash A/c						40,000
	(Bill paid to the holder of bill)

Case (iv): When three days before its maturity, the bill, as sent by Darshan to his bank for Collection.

Journal Entries in the Books of Darshan
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Varun A/c			Dr.		40,000
			To Sales A/c				40,000
	(Goods sold to Varun)
Jan.08	Bills Receivable A/c			Dr.		40,000
		To Varun A/c					40,000
	(Varun's acceptance received for two months)
Mar.08	Bill Sent for Collection A/c			Dr.		40,000
		To Bills Receivable A/c					40,000
	(Bill sent for collection sent to the bank)
Mar.11	Bank A/c			Dr.		40,000
		To Bill Sent for Collection					40,000
	(Bill amount was met)

Journal Entries in the Books of Varun
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.08	Purchases A/c			Dr.			40,000
			To Darshan					40,000
	(Goods bought from Darshan)
Jan.08	Darshan			Dr.			40,000
		To Bills Payable A/c						40,000
	(Bill drawn by Darshan accepted for two months)
Mar.11	Bills Payable A/c				Dr.		40,000
		To Bank A/c						40,000
	(Bill paid to the bank)