Question

On 15th January 2018, X sold goods to Y for ₹ 50,000 charging IGST @ 12%. Y immediately paid ₹ 6,000 in cash and accepted two bills of equal amount, the first for one month and the second for two months. The first bill was met on due date but on the due date of the second bill, Y requested that the bill be renewed for a further period of two months. X agreed provided that interest at 15% p.a. was paid immediately in cash. Y agreed to this. The second bill was met on the due date.
Give journal entries in the books of X and Y.

Answer 1

Books of X Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2018
Jan. 15	Y	Dr.		56,000
	To Sales A/c				50,000
	To Output IGST A/c				6,000
	(Goods sold to Y plus 12% inter-state GST)
Jan. 15	Bills Receivable A/c (1)	Dr.		25,000
	Bills Receivable A/c (2)	Dr.		25,000
	Cash A/c	Dr.		6,000
	To Y				56,000
	(Y accepted bills)
Feb. 18	Cash A/c	Dr.		25,000
	To Bills Receivable A/c (1)				25,000
	(Bill honoured on due date)
Mar. 18	Y	Dr.		25,000
	To Bills Receivable A/c (2)				25,000
	(Bill cancelled on due date)
Mar. 18	Y	Dr.		625
	To Interest A/c				625
	(Interest due to be paid)
Mar. 18	Cash A/c	Dr.		625
	Bills Receivable A/c	Dr.		25,000
	To Y				25,625
	(Interest received in cash by Y and a bill has also been accepted by him)
May 21	Cash A/c	Dr.		25,000
	To Bills Receivable A/c				25,000
	(Bill honoured on due date)

Books of Y Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2018
Jan. 15	Purchases A/c	Dr.		50,000
	Input IGST A/c	Dr.		6,000
	To X				56,000
	(Goods purchased from X)
Jan. 15	X	Dr.		56,000
	To Bills Payable A/c (1)				25,000
	To Bills Payable A/c (2)				25,000
	To Cash A/c				6,000
	(Bills drawn by X, accepted)
Feb. 18	Bills Payable A/c (1)	Dr.		25,000
	To Cash A/c				25,000
	(Bill honoured on due date)
Mar. 18	Bills Payable A/c (2)	Dr.		25,000
	To X				25,000
	(Bill cancelled on due date)
Mar. 18	Interest A/c	Dr.		625
	To X				625
	(Interest due to be paid)
Mar. 18	X	Dr.		25,625
	To Cash A/c				625
	To Bills Payable A/c				25,000
	(Interest is paid in cash and a new bill drawn by X, accepted)
May 21	Bills Payable A/c	Dr.		25,000
	To Cash A/c				25,000
	(Bill honoured on due date)

Working Note:

Calculation of amount of Interest

$\mathrm{Amount}\mathrm{of}\mathrm{Interest}=25,000\times \frac{15}{100}\times \frac{2}{12}=\mathrm{Rs}625$