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On 2nd February, 2016, A purchased from B goods for Rs. 17,500. A paid Rs. 2,500 immediately and for the balance gave a promissory note to B, payable after 60 days. B immediately endorsed the promissory note in favour of his creditor C for the full settlement of a debt of Rs. 15,400. On the due date of the bill, C presented the bill to A, which the latter dishonoured and C paid Rs. 50 as noting charges. On the same date, C informed B about the dishonour of the bill and B immediately settled his debt to C by cheque for Rs. 15,050 which includes noting charges. A settled B's claim by cheque for the same amount. Record the necessary journal entries in the books of B.


Solution

                                                                     In the Books of B                                                                 
                                                                        JOURNAL
Date                                                     ParticularsL.F.Amt. (Dr.)Amt. (Cr.)2016Feb 2A's A/c                                                                                                 Dr.17,500   To Sales A/c17,500(Goods sold to Verma)                                                                 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Feb 2Bank A/c                                                                                            Dr. 2,500Bills Receivable A/c                                                                          Dr.15,000   To A's A/c17,500(Received Rs. 2,500 in cash and a promissory note for thebalance)                                                                                                    ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Feb 2C's A/c                                                                                                 Dr.15,400   To Bills Receivable A/c15,000   To Discount Received A/c     400(Promissory note endorsed to Gupta in full settlement ofRs. 15,400)                                                                                                ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Apr 6A's A/c                                                                                                Dr.15,050   To C's A/c  (15,000+50)15,050(Promissory note dishonoured by A and noting charges paidby C of Rs. 50)                                                                                    –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Apr 6C's A/c                                                                                                 Dr.15,050   To Bank A/c15,050(Amount paid to C)                                                                           –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Apr 6Bank A/c                                                                                            Dr.15,050   To A's A/c15,050(Amount received from A)

Note: Discount of Rs. 400 has not been debited in the entry for dishonour because full payment has been made to C on the date of dishonour itself.

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