Question

# Ram owes ₹ 2,000 to Mohan on 1st January, 2019. On this date, he accepted a draft for the amount for 3 months. Mohan got the bill discounted at his bank @ 6% p.a. On the due date, the bill was dishonured, nothing charges ₹ 20. Ram agreed to pay ₹ 520 immediately and accept another bill for the remaining amount for 3 months together with interest at 9% p.a. This bill was met on the due date. Give the Journal entries in the books of both the parties.

Solution

## Books of Mohan Journal Date Particulars L.F. Debit Amount (₹) Credit Amount (₹) 2019         Jan.01 Bills Receivable A/c Dr.   2,000     To Ram     2,000   (Ram’s acceptance received)                 Jan.01 Bank A/c Dr.   1,970     Discount Charges A/c Dr.   30     To Bills Receivable A/c     2,000   (Ram’s acceptance was discounted at 6% p. a. for 3 months)                 April 04 Ram Dr.   2,020     To Bank     2,020   (Ram’s acceptance which was discounted with bank dishonoured)                 April 04 Cash A/c Dr.   520     To Ram     520   (Cash received from Ram)                 April 04 Ram Dr.   34     To Interest A/c     34   (Interest due from on amount outstanding at 9% p. a. for 3 months)         Working Note: Interest = 1,500 × 9% × 3/12 = Rs 34                 April 04 Bill Receivable A/c Dr.   1,534     To Ram     1,534   (Ram’s acceptance received for outstanding amount including interest)                 April 04 Cash A/c Dr.   1,534     To Bills Receivable A/c     1,534   (Cash received on honouring of bill)                   Books of Ram Journal Date Particulars L.F. Debit Amount (₹) Credit Amount (₹) 2019         Jan.01 Mohan Dr.   2,000     To Bills Payable A/c     2,000   (Bill drawn by Mohan was accepted)                 April 04 Bills Payable A/c Dr.   2,000     Noting Charges A/c Dr.   20     To Mohan     2,020   (Bill dishonoured on its due date)                 April 04 Mohan Dr.   520     To Cash A/c     520   (Cash paid to Mohan)                 April 04 Interest A/c Dr.   34     To Mohan     34   (Interest due to Mohan on outstanding balance for 3 months)                 April 04 Mohan Dr.   1,534     To Bills Payable A/c     1,534   (Bill accepted for the amount outstanding including interest to Mohan)                 April 04 Bills Payable A/c Dr.   1,534     To Cash A/c     1,534   (Bill discharged on maturity)                   AccountancyT.S. Grewal (2019)All

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