Question

Narayanan purchased goods for Rs. 25,000 from Ravinderan on February 1, 2011. Ravinderan drew upon Narayanan a bill of exchange from the same amount payable after 30 days. On the due date, Narayanan dishonoured his acceptance.

Pass the necessary Journal entries in the books of Ravinderan and Narayanan in folloiwng cases
I. When the bill was retained by Ravinderan with him till the date of its maturity.
II. When the bill was discounted by Ravinderan immediately with his bank at the rate of 6% per annum.
III. When the bill was endorsed to his creditor Ganeshan.
IV. When the bill was sent by ravideran to his bank for collection a few days before it maturity.

Answer 1

In the Books of Ravinderan
Journal Entries

I. When the bill was retained by Ravinderan with him till the date of its maturity

$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Sales A/c}& & & 25,000\\ & \text{(Goods sold to Narayanan)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Bills Receivable A/c}\text{Dr.}& & 25,000& \\ & \text{To Narayanan's A/c}& & & 25,000\\ & \text{(Acceptance received)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Receivable A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

II. When the bill was discounted with bank at the rate of 6%
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Sales A/c}& & & 25,000\\ & \text{(Goods sold to Narayanan)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Bills Receivable A/c}\text{Dr.}& & 25,000& \\ & \text{To Narayanan's A/c}& & & 25,000\\ & \text{(Acceptance received)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Bank A/c}\text{Dr.}& & 24,877& \\ & \text{Discount Ac}\text{Dr.}& & 123& \\ & \text{To Bills Receivable A/c}& & & 25,000\\ & \text{(Bill discounted )}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bank A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

III. When the bill was endorsed to his creditor Ganeshan
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Sales A/c}& & & 25,000\\ & \text{(Goods sold to Narayanan)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Receivable A/c}\text{Dr.}& & 25,000& \\ & \text{To Narayanan's A/c}& & & 25,000\\ & \text{(Acceptance received)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Ganeshan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Receivable A/c}& & & 25,000\\ & \text{(Acceptance of Narayanan}& & & \\ & \text{endorsed to Ganeshan )}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Narayanan's A/c}\text{Dr.}& & 25000& \\ & \text{To Ganeshan's A/c}& & & 25000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

IV. When the bill was sent by Ravinderan to his bank for collection
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Sales A/c}& & & 25,000\\ & \text{(Goods sold to Narayanan)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Receivable A/c}\text{Dr.}& & 25,000& \\ & \text{To Narayanan's A/c}& & & 25,000\\ & \text{(Acceptance received)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bill Sent for Collection A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Receivable A/c}& & & 25,000\\ & \text{(Bill sent for collection )}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Narayanan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bill Sent for Collection A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

In the Books of Narayanan
Journal Entries
I. When the bill was retained by Ravinderan with him till the date of its maturity
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Purchases A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Goods purchased)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Ravinderan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Payable A/c}& & & 25,000\\ & \text{(Acceptance given)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Payable A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

II. When the bill was Discounted with the bank at the rate of 6%
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Purchases A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Goods purchased)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Ravinderan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Payable A/c}& & & 25,000\\ & \text{(Acceptance given)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Payable A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

III. When the bill was endorsed to his creditor Ganeshan
$$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Purchases A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Goods purchased)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Ravinderan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Payable A/c}& & & 25,000\\ & \text{(Acceptance given)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Payable A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$

IV. When the bill was sent by ravinderan to his bank for collection $$\begin{array}{ccccc}\text{Date}& \text{Particular}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & \\ \text{Feb 1}& \text{Purchases A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Goods purchased)}& & & \\ & \underset{–}{}& & & \\ \text{Feb 1}& \text{Ravinderan's A/c}\text{Dr.}& & 25,000& \\ & \text{To Bills Payable A/c}& & & 25,000\\ & \text{(Acceptance given)}& & & \\ & \underset{–}{}& & & \\ \text{Mar 5}& \text{Bills Payable A/c}\text{Dr.}& & 25,000& \\ & \text{To Ravinderan's A/c}& & & 25,000\\ & \text{(Bill dishonoured)}& & & \end{array}$$