On 1st January, 2019, X sold goods of ₹ 20,000 to Y and drew a bill on Y at three months for the amount. Y accepted the bill. The bill is met on maturity. Pass the necessary Journal entries in the books of X and Y, if X discounted the bill @ 12% p.a. from bank on 4th January.

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Solution

In the books of X

Journal

Date

Particulars

L.F.

Debit

Amount
(₹)

Credit
Amount
(₹)

2019

January 01
Y’s A/c
Dr.

20,000

To Sales A/c

20,000

(Being goods sold to Y on credit)

January 01
Bills Receivable A/c
Dr.

20,000

To Y’s A/c

20,000

(Being bill drawn on Y for three months)

January 04
Bank A/c
Dr.

19,400

Discounting Charges A/c
Dr.

600

To Bills Receivable A/c

20,000

(Being bill discounted with bank and charges paid @12% p.a.)

Working Notes:
Discounting Charges = ₹ (20,000 × 12/100 × 3/12) = ₹ 600

In the books of Y

Journal

Date

Particulars

L.F.

Debit

Amount
(₹)

Credit
Amount
(₹)

2019

Jan. 01
Purchases A/c
Dr.

20,000

To X’s A/c

20,000

(Being goods purchased from X on credit)

Jan. 01
X’s A/c
Dr.

20,000

To Bills Payable A/c

20,000

(Being acceptance given to X)

April 04
Bills Payable A/c
Dr.

20,000

To Bank A/c

20,000

(Being bill paid on maturity)

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In the books of X
Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019
January 01	Y’s A/c	Dr.		20,000
	To Sales A/c				20,000
	(Being goods sold to Y on credit)

January 01	Bills Receivable A/c	Dr.		20,000
	To Y’s A/c				20,000
	(Being bill drawn on Y for three months)

January 04	Bank A/c	Dr.		19,400
	Discounting Charges A/c	Dr.		600
	To Bills Receivable A/c				20,000
	(Being bill discounted with bank and charges paid @12% p.a.)

In the books of Y
Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019
Jan. 01	Purchases A/c	Dr.		20,000
	To X’s A/c				20,000
	(Being goods purchased from X on credit)

Jan. 01	X’s A/c	Dr.		20,000
	To Bills Payable A/c				20,000
	(Being acceptance given to X)

April 04	Bills Payable A/c	Dr.		20,000
	To Bank A/c				20,000
	(Being bill paid on maturity)