Question

On 1st January, 2010, Arun purchased from Barun goods invoiced at ₹ 10,000. On the same date, Barun drew upon Arun a bill for the amount at 2 months and Arun accepted the same. On 4th January, 2010, Barun got the bill discounted with his bank @12% per annum. On due date, Arun told Barun that he was not in a position to pay the full amount and requested Barun to accept ₹ 5,000 in cash and draw a fresh bill at 2 months for the remaining amount plus interest at 15% per annum, Barun agreed. The second bill was duly met on the due date.
Give journal entries to record the above transactions in the books of Barun.

Answer 1

Books of Barun Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2010
Jan. 01	Arun	Dr.		10,000
	To Sales A/c				10,000
	(Goods sold to Arun)
Jan. 01	Bills Receivable A/c	Dr.		10,000
	To Arun				10,000
	(Arun accepted the bill)
Jan. 04	Bank A/c	Dr.		9,800
	Discounting Charges A/c	Dr.		200
	To Bills Receivable A/c				10,000
	(Bill discounted with the bank @ 12% p.a. for 2 months)
Mar. 04	Arun	Dr.		10,000
	To Bank A/c				10,000
	(Bill cancelled on due date)
Mar. 04	Cash	Dr.		5,000
	To Arun				5,000
	(Cash received from Arun)
Mar. 04	Arun	Dr.		125
	To Interest A/c				125
	(Interest due to be received)
Mar. 04	Bills Receivable A/c	Dr.		5,125
	To Arun				5,125
	(Arun accepted the new bill)
May 07	Cash A/c	Dr.		5,125
	To Bills Receivable A/c				5,125
	(Bill honoured on due date

Working Note:

WN 1Calculation of Discounting Charges

$\mathrm{Discounting}\mathrm{Charges}=10,000\times \frac{12}{100}\times \frac{2}{12}=\mathrm{Rs}200$

WN2 Calculation of amount of Interest

$\mathrm{Amount}\mathrm{of}\mathrm{Interest}=5,000\times \frac{15}{100}\times \frac{2}{12}=\mathrm{Rs}125$