Question

On Jan 15, 2016 Raghu sold goods worth Rs 35,000 to Devendra and drew up to the latter three bills of exchanges. The first bill was for Rs 5,000 payable after one month, the second bill was for Rs 20,000 payable after three months and third bill for balance amount for 4 months. Raghu endorsed the first bill in favour of his creditor Dewan in full settlement of a debt of Rs 5,200. The second bill was discounted by Raghu @ 6 % p.a. and the third bill was retained by Raghu till the date of maturity. Devendra dishonoured the bill on maturity and the bank paid Rs 30 as noting charges. Four days before the maturity of the third bill Raghu, sent the same for collection to his bank. The third bill was also dishonoured by Devendra and the bank paid Rs 200 as noting charges. Five days after the dishonour of the bill Devendra paid the entire amount due to Raghu along with interest Rs 1,000 for this purpose Devendra obtained a short term loan from his bank. You are requested to record the necessary journal entries in the books of Raghu Devendra and Dewan and also prepare Devendra’s account in Raghu’s books and Raghu’s account in Devendra’s account.

Answer 1

Books of Raghu Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.15	Devendra		Dr.			35,000
		To Sales A/c					35,000
	(Goods sold to Devendra)
Jan.15	Bills Receivable A/c		Dr.			35,000
		To Devendra					35,000
	(Three bills received from Devendra–the first bill Rs 5,000, the second bill Rs 20,000, the third bill Rs 10,000)
Jan.15	Dewan		Dr.			5,200
		To Bills Receivable A/c					5,000
		To Discount Received A/c					200
	(The first bill endorsed to Dewan in full settlement of amount due to him)
Jan.15	Bank A/c			Dr.		19,700
	Discount A/c			Dr.		300
		To Bills Receivable A/c					20,000
	(The second bill discounted with bank at 6% p.a.)
Apr.18	Devendra			Dr.		20,030
		To Bank A/c					20,030
	(The second bill dishonoured and bank paid Rs 30 for noting charges)
May14	Bill Sent for Collection A/c		Dr.			10,000
		To Bills Receivable A/c					10,000
	(The third bill sent to bank for collection)
May18	Davendra		Dr.			10,200
		To Bill sent for collection A/c					10,000
		To Bank A/c					200
	(The third bill dishonoured and bank paid Rs 200 as noting charges)
May23	Davendra		Dr.			1,000
		To Interest A/c					1,000
	(Interest due to Devendra on account of bills dishonoured)
May23	Cash A/c		Dr.			31,230
		To Davendra					31,230
	(Cash received from Davendra)

Ledger Davendra'sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2016				2016
Jan.15	Sales		35,000	Jan.15	Bills Receivable		35,000
Apr.18	Bank		20,030	May23	Cash		31,230
May18	Bills Sent for Collection		10,000
May18	Bank		200
May23	Interest		1,000
			66,230				66,230

Books of Davendra Journal
Date		Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.15	Purchases A/c		Dr.			35,000
		To Raghu					35,000
	(Goods bought from Raghu)
Jan.15	Raghu		Dr.			35,000
		To Bills Payable A/c					35,000
	(Three bills drawn by Raghu accepted: the first bill for Rs 5,000 payable after one month, the second for Rs 20,000 payable after 3 months and the third for Rs 10,000 payable after 4 months)
Feb.18	Bills Payable A/c			Dr.		5,000
		To Cash					5,000
	(The first bill discharged on the due date)
Apr.18	Bills Payable A/c			Dr.		20,000
	Noting Charges A/c			Dr.		30
		To Raghu					20,030
	(The second bill dishonoured and Noting Charges Rs 30)
May18	Bills Payable A/c			Dr.		10,000
	Noting Charges A/c			Dr.		200
		To Raghu					10,200
	(The third bill dishonoured and Noting Charges Rs 200)
May23	Interest A/c			Dr.		1,000
		To Raghu					1,000
	(Interest charged Rs 1,000 on account of bills dishonoured)
May23	Cash A/c			Dr.		31,230
		To Bank Loan A/c					31,230
	(Bank loan taken for settling Raghu's account)
May23	Raghu			Dr.		31,230
		To Cash A/c					31,230
	(Cash paid to Raghu)

Ledger Raghu’sAccount
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2016				2016
Jan.15	Bills Payable		35,000	Jan.15	Purchases		35,000
May23	Cash		31,230	Apr.18	Bills Payable		20,000
				Apr.18	Noting Charges		30
				May18	Bills Payable		10,000
				May18	Noting Charges		200
				May18	Interest		1,000
			66,230				66,230

Books of Dewan Journal
Date		Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2016
Jan.15	Bills Receivable A/c			Dr.			5,000
	Discount Allowed A/c			Dr.			200
			To Raghu					5,200
	(Bill Receivable received from Raghu for one month and allowed him discount of Rs 200)
Feb.18	Cash A/c				Dr.		5,000
		To Bills Receivable A/c						5,000
	(Bill met on maturity)

Note: In this question, there is no information regarding honour of the first bill of Rs 5,000. Therefore, it has been assumed that the first bill has been met on maturity.