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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.

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Solution

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

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