Question

Nikhil sold goods for Rs 23,000 to Akhil on Dec. 01, 2017. He drew upon Akhil a bill of exchange for the same amount payable after 2 months. Akhil accepted the bill and sent it back to Nikhil. Nikhil discounted the bill immediately with his bank @12 p.a. On the due date Akhil dishonoured the bill of exchange and the bank paid Rs 100 as noting charges. Akhil requested Nikhil to draw a new bill upon him with interest @10% p.a. which he agreed. The new bill was payable after two months. A week before the maturity of the second bill Akhil requested Nikhil to cancel the second bill. He further requested to accept Rs 10,000 in cash immediately and drew a third bill upon him including interest of Rs 500. Nikhil agreed to Akhil’s request. The third bill was payable after one month. Akhil met the third bill on its maturity. Record the necessary journal entries in the books of Nikhil and Akhil and also prepare Akhil’s account in the books of Nikhil and Nikhil’s account in the books of Akhil.

Answer 1

Books of Nikhil Journal
Date			Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2017
Dec.01	Akhil					Dr.		23,000
		To Sales A/c							23,000
	(Goods sold to Akhil)
Dec.01	Bills Receivable A/c					Dr.		23,000
		To Akhil							23,000
	(Akhil's acceptance received)
Dec.01	Bank A/c					Dr.		22,540
	Discount A/c					Dr.		460
		To Bills Receivable A/c							23,000
	(Akhil's acceptance discounted at 12% p.a with bank)
2018
Feb.04	Akhil					Dr.		23,100
		To Bank A/c							23,100
	(Akhil's acceptance dishonoured, bank paid Rs 100 as noting charges)
Feb.04	Akhil			Dr.				385
		To Interest A/c							385
	(Interest credited on account of bill dishonoured at 10% p.a. for two months)
Feb.04	Bills Receivable A/c				Dr.			23,485
		To Akhil							23,485
	(New acceptance received from Akhil for next two months received)
Apr.01	Akhil				Dr.			23,485
		To Bills Receivable A/c							23,485
	(The second bill cancelled one week before maturity)
Apr.01	Cash A/c				Dr.			10,000
		To Akhil							10,000
	(Cash received from Akhil)
Apr.01	Akhil				Dr.			500
		To Interest A/c							500
	(Interest due from Akhil for the bill)
Apr.01	Bills Receivable A/c				Dr.			13,985
			To Akhil						13,985
	(Bill from Akhil received)
May 04	Cash A/c				Dr.			13,985
			To Bills Receivable A/c						13,985
	(The third bill met on due date)

Akhil'sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2017				2017
Dec.01	Sales		23,000	Dec.01	Bills Receivable		23,000
2018				2018
Feb.04	Bank		23,100	Feb.04	Bills Receivable		23,485
Feb.04	Interest		385	Apr.01	Cash		10,000
Apr.01	Bills Receivable		23,485	Apr.01	Bills Receivable		13,985
Apr.01	Interest		500
			70,470				70,470

Books of Akhil Journal
Date			Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Dec.01	Purchases A/c			Dr.		23,000
		To Nikhil					23,000
	(Goods bought from Nikhil)
Dec.01	Nikhil			Dr.		23,000
		To Bills Payable A/c					23,000
	(Bill drawn by Nikhil payable after two months accepted)
2018
Feb.04	Bills Payable A/c			Dr.		23,000
	Noting Charges A/c			Dr.		100
		To Nikhil					23,100
	(Bill dishonoured on due date and Rs 100 paid by the holder of bill)
Feb.04	Interest A/c			Dr.		385
		To Nikhil A/c					385
	(Interest due to Nikhil for the bill dishonoured)
Feb.04	Nikhil			Dr.		23,485
		To Bills Payable A/c					23,485
	(New bill accepted payable after two months)
Apr.01	Bills Payable A/c			Dr.		23,485
		To Nikhil					23,485
	(Bill cancelled before maturity)
Apr.01	Nikhil			Dr.		10,000
		To Cash A/c					10,000
	(Cash paid to Nikhil)
Apr.01	Interest A/c			Dr.		500
		To Nikhil					500
	(Interest due to Nikhil for bill cancellation)
Apr.01	Nikhil			Dr.		13,985
		To Bills Payable A/c					13,985
	(New bill accepted payable after one month)
May 04	Bills Payable A/c			Dr.		13,985
		To Cash A/c					13,985
	(The third bill met on maturity)

Nikhil Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2017				2017
Dec.01	Bills Payable		23,000	Dec.01	Purchases		23,000
2018				2018
Feb.04	Bills Payable		23,485	Feb.04	Bills Payable		23,000
Apr.01	Cash		10,000	Feb.04	Noting Charge		100
Apr.01	Bills Payable		13,985	Feb.04	Interest		385
				Apr.01	Bills Payable		23,485
				Apr.01	Interest		500
			70,470				70,470