PRACTICAL PROBLEMS

On 7^th May, 2011 Kulkarni of Karvenagar draws a bill on Patwardhan of Latur for Rs 18,000 at 3 months. Patwardhan accepts and returns it to Kulkarni. Kulkarni then sent the bill into his bank for collections.

On due date Patwardhan finds himself unable to make payment of the bill and request Kulkarni to renew it. Kulkarni agreed on the condition that Patwardhan should pay Rs 5,000 in cash, and should accept new bill for the balance at 2 months with interest @ 18% p.a. These arrangements were carried through. Before due date Patwardhan declared as insolvent and 20% of the amount due could be recovered from his private estate as first and final dividend.

Give journal entries in the books of Kulkarnis. Also prepare Kulkarni’s Accounts in the books of Patwardhan.

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Solution

Books of Kulkarni

Journal Entry

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

2011

May.07

Bills Receivable A/c

Dr.

18,000

To Patwardhan

18,000

(Bill drawn and accepted)

May.07

Bill Sent for Collection A/c

Dr.

18,000

To Bills Receivable A/c

18,000

(Bill sent to bank for collection)

Aug.10

Patwardhan

Dr.

18,000

To Bill Sent for Collection A/c

18,000

(Bill cancelled)

Aug.10

Cash A/c

Dr.

5,000

To Patwardhan

5,000

(Cash received from Patwardhan)

Aug.10

Patwardhan

Dr.

390

To Interest A/c

390

(Interest charges due on Rs 13,000 @ 18% for 2 months)

Aug.10

Bills Receivable A/c

Dr.

13,390

To Patwardhan

13,390

(New bill drawn and accepted with interest of Rs 390)

Oct.13

Patwardhan

Dr.

13,390

To Bills Receivable A/c

13,390

(Bill cancelled due to insolvency)

Oct.13

Cash/Bank A/c

Dr.

2,678

Bad-Debts A/c

Dr.

10,712

To Patwardhan

13,390

(20% of the amount recovered from his private estate)

In the Books of Patwardhan

Kulkarni’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

(Rs)

Date

Particulars

J.F.

Amount

(Rs)

2011

2011

May.07

Bills Payable A/c

18,000

May.07

Balance b/d

18,000

Aug.10

Cash A/c

5,000

Aug.10

Bills Payable A/c

18,000

Aug.10

Bills Payable

13,390

Oct.13

Interest A/c

390

Oct.13

Cash A/c

2,678

Oct.13

Bills Payable A/c

13,390

Oct.13

Deficiency

10,712

49,780

49,780

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Books of Kulkarni
Journal Entry
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
May.07	Bills Receivable A/c	Dr.		18,000
	To Patwardhan				18,000
	(Bill drawn and accepted)

May.07	Bill Sent for Collection A/c	Dr.		18,000
	To Bills Receivable A/c				18,000
	(Bill sent to bank for collection)

Aug.10	Patwardhan	Dr.		18,000
	To Bill Sent for Collection A/c				18,000
	(Bill cancelled)

Aug.10	Cash A/c	Dr.		5,000
	To Patwardhan				5,000
	(Cash received from Patwardhan)

Aug.10	Patwardhan	Dr.		390
	To Interest A/c				390
	(Interest charges due on Rs 13,000 @ 18% for 2 months)

Aug.10	Bills Receivable A/c	Dr.		13,390
	To Patwardhan				13,390
	(New bill drawn and accepted with interest of Rs 390)

Oct.13	Patwardhan	Dr.		13,390
	To Bills Receivable A/c				13,390
	(Bill cancelled due to insolvency)

Oct.13	Cash/Bank A/c	Dr.		2,678
	Bad-Debts A/c	Dr.		10,712
	To Patwardhan				13,390
	(20% of the amount recovered from his private estate)

In the Books of Patwardhan
Kulkarni’s Account
Dr.	Cr.
Date		Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
2011					2011
May.07		Bills Payable A/c		18,000	May.07	Balance b/d		18,000
Aug.10		Cash A/c		5,000	Aug.10	Bills Payable A/c		18,000
Aug.10		Bills Payable		13,390	Oct.13	Interest A/c		390
Oct.13		Cash A/c		2,678	Oct.13	Bills Payable A/c		13,390
Oct.13		Deficiency		10,712

				49,780				49,780