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Question

On 1st January, 2019 for goods sold, Ramesh drew a Bill of Exchange on Mahesh for ₹ 4,000, for a period of 3 months. Mahesh accepts it and returns to Ramesh. Ramesh then endorses it to Mukesh who in turn endorses it to Suresh on 1st February, 2019. The bill is then discounted by Suresh on the same date with his bank at 5% p.a. On the due date the bill is dishonoured.
Pass the necessary Journal entries in the books of all the four parties.

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Solution

Books of Ramesh

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

Jan.01

Mahesh

Dr.

4,000

To Sales A/c

4,000

(Goods were sold to Mahesh)

Jan.01

Bills Receivable A/c

Dr.

4,000

To Mahesh

4,000

(Mahesh’s acceptance was received)

Jan.01

Mukesh

Dr.

4,000

To Bills Receivable A/c

4,000

(Mahesh’s acceptance was endorsed in favour of Mukesh)

April 04

Mahesh

Dr.

4,000

To Mukesh

4,000

(Mahesh’s acceptance was dishonoured)

Books of Mahesh

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

Jan.01

Purchases A/c

Dr.

4,000

To Ramesh

4,000

(Goods were bought from Ramesh)

Jan.01

Ramesh

Dr.

4,000

To Bills Payable A/c

4,000

(Bill drawn by Ramesh was accepted)

April 04

Bills Payable A/c

Dr.

4,000

To Ramesh

4,000

(Bill Payable was dishonoured)

Books of Mukesh

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

Jan.01

Bills Receivable A/c

Dr.

4,000

To Ramesh

4,000

(Bill received from Ramesh)

Feb.01

Suresh

Dr.

4,000

To Bills Receivable A/c

4,000

(Bills which had received from Suresh, endorsed to Suresh)

April 04

Ramesh

Dr.

4,000

To Suresh

4,000

(Bill received from Ramesh was dishonoured)

Books of Suresh

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

Feb.01

Bills Receivable A/c

Dr.

4,000

To Mukesh

4,000

(Bill Receivable received from Mukesh)

Feb.01

Bank A/c

Dr.

3,967

Discount Charges A/c

Dr.

33

To Bills Receivable A/c

4,000

(Bill discount with bank at 5% p.a. for two months)

April 04

Mukesh

Dr.

4,000

To Bank A/c

4,000

(Bill received from Mukesh was dishonoured)


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