Question

On 1st May, A drew and B accepted a bill at three months for 2,000. On 4th May, A discounted the bill@ 6 percent per annum and remitted half the proceeds to B. On 1st June, B drew and A accepted a bill at three months for 500. On 4th June, B discounted the bill @6$\%$ per annum and remitted half the proceeds to A. A and B agreed to share the discount equally. At maturity, A met his acceptance but B failed to meet his, and A had to pay for it. A then drew and B accepted a new bill at three months for the amount of the original bill plus 30 for interest. On 1st November, B became insolvent and paid to his creditors @ 50 paise in the rupee. Write up the entries in A's Journal.

Answer 1

Journal Entries In the Books of A

$\begin{array}{ccccc}\text{S.No.}& \text{Particulars}& \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & \text{Amount (Rs)}& \text{Amount (Rs)}\\ \text{May 1}& \text{Bills Receivable A/c}\text{Dr.}& & 2,000& \\ & \text{To B}& & & 2,000\\ & \underset{–}{\text{(Being acceptance received)}}& & & \\ \text{May 4}& \text{Cash A/c}\text{Dr.}& & 1,970& \\ & \text{Discounting Charges A/c}\text{Dr.}& & 30& \\ & \text{To Bills Receivable A/c}& & & 2,000\\ & \underset{–}{\text{(Being the bill discounted)}}& & & \\ \text{May 4}& \text{B}\text{Dr.}& & 1,000& \\ & \text{To Cash A/c}& & & 985\\ & \text{To Discounting Charges A/c}& & & 15\\ & \underset{–}{\text{(Being half proceeds of the bill remitted to B)}}& & & \\ \text{June 1}& \text{B}\text{Dr.}& & 500& \\ & \text{To Bills Payable A/c}& & & 500\\ & \underset{–}{\text{(Being acceptance given to B)}}& & & \\ \text{June 4}& \text{Cash A/c}\text{Dr.}& & 246.25& \\ & \text{Discounting Charges A/c}\text{Dr.}& & 3.75& \\ & \text{To B}& & & 250\\ & \underset{–}{\text{(Being half proceeds of the bill remitted by B)}}& & & \\ \text{Aug.4}& \text{B}\text{Dr.}& & 2,000& \\ & \text{To Bank A/c}& & & 2,000\\ & \underset{–}{\text{(Being the bill dishonoured)}}& & & \\ \text{Aug. 4}& \text{B}\text{Dr.}& & 30& \\ & \text{To Interest A/c}& & & 30\\ & \underset{–}{\text{(Being interest due on B)}}& & & \\ \text{Aug. 4}& \text{Bills Receivable A/c}\text{Dr.}& & 2,030& \\ & \text{To B}& & & 2,030\\ & \underset{–}{\text{(Being the bill renewed)}}& & & \\ \text{Sep. 4}& \text{Bills Payable A/c}\text{Dr.}& & 500& \\ & \text{To Cash A/c}& & & 500\\ & \underset{–}{\text{(Being acceptance of the bill met)}}& & & \\ \text{Nov. 1}& \text{B A/c}\text{Dr.}& & 2,030& \\ & \text{To Bills Receivable A/c}& & & 2,030\\ & \text{(Being the bill treated as dishonoured on}& & & \\ & \underset{–}{\text{B's insolvency)}}& & & \\ \text{Nov. 4}& \text{Cash A/c}\text{Dr.}& & 640& \\ & \text{Bad Debts A/c}\text{Dr.}& & 640& \\ & \text{To B A/c}& & & 1,280\\ & \text{(Being amount @50 paise in the rupee received}& & & \\ & \text{and the balance written off as bad debt)}& & & \end{array}$