On January $15$ , $2011$ , Raghu sold goods worth Rs $35, 000$ to Devendra and drew upto 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 at the rate of $6 %$ per annum 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.

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Solution

Journal entries in the books of Raghu:
Jan. 15, 2011
a) Devendra A.c Dr. 35,000
To Sales A/c 35,000
(Goods sold to Devendra)

b) Bills Receivable 1 (1 month)A/c Dr. 5,000
Bills Receivable 2 (3 months) A/c Dr. 20,000
Bills Receivable 3 (4 months) A/c Dr. 10,000
To Devendra A/c 35,000
(Bills receivable received)

c) Dewan A/c Dr. 5,200
To Bills Receivale 1 A/c 5,000
To Discount A/c 200
(First bill endorsed to Dewan)

d) Bank A/c Dr. 19,700
Discount A/c Dr. 300
To Bills Receivable 2 20,000
(Second bill discounted at 6%)

e) Devendra A/c Dr 20,030
To Bank A/c 20,030
(Second bill dishonoured and noting charges paid by bank)

f) Bill sent for collection A/c Dr. 10,000
To Bills Receivable 3 A/c 10,000
(Third bill sent for collection)

g) Devendra A/c Dr. 10,200
To Bank A/c 10,200
(Third bill dishonoured and noting charges paid by bank)

h) Bank A/c Dr. 20,030
To Devendra A/c 20,030
(Second bill paid along with interest by Devendra)

i) Bank A/c Dr. 10,200
To Devendra A/c 10,200
(Third bill paid after it was dishonoured)

j) Interest A/c Dr. 1,000
To Bills Receivable A/c 1,000
(Interest amount paid for the delay in settling the bills)

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