Question

PRACTICAL PROBLEMS

Harbhajan draws a bill on Manmit for Rs 8,000 at 3 months. Manmit accepts and return to Harbhajan. Harbhajan then sends the bill towards his bank for collections.

On due date Manmit find himself unable to make payment of the bill and request Harbhajan to renew it. He accepted the proposal on the condition that Manmit should pay Rs 2,000 along with interest @ 15% p.a. in cash and should accepts new bill for the balance at 2 months. These arrangements were carried through. One month before Manmit retired his acceptance @ 12% p.a.

Give journal entries and Manmit’s Account in the books of Harbhajan.

Answer 1

Books of Harbhajan
Journal Entry
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bills Receivable A/c	Dr.		8,000
	To Manmit				8,000
	(Bill drawn and accepted)
	Manmit	Dr.		8,000
	To Bills Receivable A/c				8,000
	(Bill dishonoured on due date)
	Manmit	Dr.		150
	To Interest A/c				150
	(Interest charged for renewal of bill)
	Cash A/c	Dr.		2,150
	Bills Receivable A/c	Dr.		6,000
	To Manmit				8,150
	(Rs 2,000 along with the interest received in advance and for rest of the amount new bill was drawn and accepted)
	Cash A/c	Dr.		5,940
	Rebate A/c	Dr.		60
	To Bills Receivable A/c				6,000
	(Bill retired by Manmit before one month @ 12% per annum)

Manmit’s Account
Dr.	Cr.
Date		Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
		Balance b/d		8,000		Bills Receivable A/c		8,000
		Bills Receivable A/c		8,000		Cash A/c		2,150
		Interest A/c		150		Bills Receivable A/c		6,000
				16,150				16,150