Question

Ravi Sold goods for Rs. 40,000 to Sudershan on February 13, 2011. He drew four bills of exchange upon Sudershan. The first bill was for Rs. 5,000 payable after one month. The second bill was for Rs. 10,000 payable after 40 days; the third bill was for Rs. 12,000 payable after three months and fourth bill was for the balance amount payable after 19 days. Sudershan accepted all the bills and returned the same to Ravi. Ravi discounted the first bill with his bank at 6% per annum. He endorsed the second bill to his creditor Mustaq for the full settlement of a debt of Rs. 10,200. the third bill was kept by Ravi with him till the date of maturity. Five days before the maturity of the fourth bill, Ravi sent the bill to his bank for collection. All the four bills were dishonoured by Sudershan on maturity. Sudershan settled Ravi's Claim in cash three days after the dishonour of each bill along with interest at the rate of 12% per annum for the terms of the bills.
You are requested to record the necessary Journal entries in the books of Ravi, Sudershan, Mustaq and Bank for the above transactions. Also prepare Sudershan's Account and Mustaq's account in the books of Ravi.

Answer 1

In the Books of Ravi
Journal Entries

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ \text{2011}& & & & & \\ \text{Feb 13}& \text{Sudershan's A/c}& \text{Dr.}& & 40,000& \\ & \text{To Sales A/c}& & & & 40,000\\ & \text{(Goods sold to Sudershan)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 13}& \text{Bills Receivable Ist A/c}& \text{Dr.}& & 5,000& \\ & \text{Bills Receivable IInd A/c}& \text{Dr.}& & 10,000& \\ & \text{Bills Receivable IIIrd A/c}& \text{Dr.}& & 12,000& \\ & \text{Bills Receivable IVth A/c}& \text{Dr.}& & & \\ & \text{To Sudershan's A/c}& & & & 40,000\\ & \text{(Acceptance sreceived from Sudershan)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 13}& \text{Bank A/c}& \text{Dr.}& & 4,975& \\ & \text{Discount A/c}& \text{Dr.}& & 25& \\ & \text{To Bills Receivable Ist A/c}& & & & 5,000\\ & \text{(Ist bill discounted with bank)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 13}& \text{Mustaq's A/c}& \text{Dr.}& & 10,200& \\ & \text{To Bills Receivable IInd A/c}& & & & 10,000\\ & \text{To Discount Received A/c}& & & & 200\\ & \text{(IInd acceptance of Sudershan}& & & & \\ & \text{endorsed to Mustaq )}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 3}& \text{Bill Sent for Collection A/c}& \text{Dr.}& & 13,000& \\ & \text{To Bills Receivable IVth A/c}& & & & 13,000\\ & \text{(Bill sent for collection)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 7}& \text{Sudershan's A/c}& \text{Dr.}& & 13,000& \\ & \text{To Bill Sent for Collection A/c}& & & & 13,000\\ & \text{(Bill sent to bank for collection)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 7}& \text{Sudershan's A/c}& \text{Dr.}& & 81& \\ & \text{To Interest A/c}& & & & 81\\ & \text{(Inteerest due for 19 days)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 10}& \text{Cash A/c}& \text{Dr.}& & 13,081& \\ & \text{To Sudershan's A/c}& & & & 13,081\\ & \text{(Cash received from Suderhsan)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 16}& \text{Sudershan's A/c}& \text{Dr.}& & 5,000& \\ & \text{To Bank A/c}& & & & 5,000\\ & \text{(First bill dishonoured)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 16}& \text{Sudershan's A/c}& \text{Dr.}.& & 50& \\ & \text{To Interest A/c}& & & & 50\\ & \text{(Interest rate 12\% due 1 month}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 19}& \text{Cash A/c}& \text{Dr.}& & 5,050& \\ & \text{To Sudershan's A/c}& & & & 5,050\\ & \text{(Payment receeived from Sudershan)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 28}& \text{Sudershan's A/c}& \text{Dr.}& & 10,000& \\ & \text{Discount A/c}& \text{Dr.}& & 200& \\ & \text{To Mustaq's A/c}& & & & 10,200\\ & \text{(Bill dishonoured on due date and discounted )}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 28}& \text{Sudershan's A/c}& \text{Dr.}& & 132& \\ & \text{To Interest A/c}& & & & 132\\ & \text{(Interest at the rate of 12 \% due)}& & & & \\ & \underset{–}{}& & & & \\ \text{Apr 1}& \text{Cash A/c}& \text{Dr.}& & 10,132& \\ & \text{To Sudershan's A/c}& & & & 10,132\\ & \text{(Payment received )}& & & & \\ & \underset{–}{}& & & & \\ \text{May 16}& \text{Sudershan's A/c}& \text{Dr.}& & 12,000& \\ & \text{To Bills Receivable IIIrd A/c}& & & & 12,000\\ & \text{(Bill dishonoured on due date)}& & & & \\ & \underset{–}{}& & & & \\ \text{May 16}& \text{Sudershan's A/c}& \text{Dr.}& & 360& \\ & \text{To Bills Receivable IIIrd A/c}& & & & 360\\ & \text{(Interest at the rate of 12 \% due)}& & & & \\ & \underset{–}{}& & & & \\ \text{May 19}& \text{Cash A/c}& \text{Dr.}& & 12,360& \\ & \text{To Sudershan's A/c}& & & & 12,360\\ & \text{(Cash received from Sudershan )}& & & & \\ & & & & & \end{array}$

Dr. Sudershan's Account Cr.
$$\begin{array}{cccccccc}\text{Date}& \text{Particular}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particular}& \text{J.F.}& \text{Amt. (Rs.)}\\ 2011& & & & 2011& & & \\ \text{Feb 13}& \text{Sales A/c}& & 40,000& \text{Feb 13}& \text{Bills}& & \\ & & & & & \text{Receivable Ist A/c}& & 5,000\\ \text{Mar 7}& \text{Bill Sent for}& & & \text{Feb 13}& \text{Bills}& & \\ & \text{Collection A/c}& & 13,000& & \text{Receivable IInd A/c}& & 10,000\\ \text{Mar 7}& \text{Interest A/c}& & 81& \text{Feb 13}& \text{Bills}& & \\ & & & & & \text{Receivable IIIrd A/c}& & \text{12,000}\\ \text{Mar 16}& \text{Bank A/c}& & 5,000& \text{Feb 13}& \text{Bills}& & \\ & & & & & \text{Receiveable IVth A/c}& & 13,000\\ \text{Mar 16}& \text{Interest A/c}& & 50& \text{Mar 19}& \text{Cash Ac}& & 13,081\\ \text{Mar 28}& \text{Mustaq's A/c}& & 10,000& \text{Mar 19}& \text{Cash A/c}& & 5,050\\ \text{Mar 28}& \text{Interest A/c}& & 132& \text{Apr 1}& \text{Cash A/c}& & 10,132\\ \text{May 16}& \text{Bills}& & 12,000& \text{May 19}& \text{Cash A/c}& & 12,360\\ & \text{Receivable IIIrd A/c}& & & & & & \\ \text{May 19}& \text{Interest A/c}& & 360& & & & \\ & & & \underset{–}{}& & & & \underset{–}{}\\ & & & 80,623& & & & 80,623\\ & & & \underset{–}{}& & & & \underset{–}{}\end{array}$$

Dr. Mustaq's Account Cr.
$$\begin{array}{cccccccc}\text{Date}& \text{Particular}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particular}& \text{J.F.}& \text{Amt. (Rs.)}\\ \text{2011}& & & & \text{2011}& & & \\ \text{Feb 13}& \text{Bills}& & & \text{Mar 28}& \text{Sudershan's A/c}& & 10,000\\ & \text{Receivable A/c}& & 10,000& \text{Mar 28}& \text{Discount}& & \\ & \text{Discount}& & & & \text{Received A/c}& & 200\\ & \text{Received A/c}& & 200& & & & \\ & & & \underset{–}{}& & & & \underset{–}{}\\ & & & 10,200& & & & 10,200\\ & & & \underset{–}{}& & & & \underset{–}{}\end{array}$$

In the Books of Sudershan
Journal Entries

$$\begin{array}{cccccc}\text{Date}& \text{Particular}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & & \\ \text{Feb 13}& \text{Purchases A/c}& \text{Dr.}& & 40,000& \\ & \text{To Ravi's A/c}& & & & 40,000\\ & \text{(Goods Purchased)}& & & & \\ & \underset{–}{}& & & & \\ \text{Feb 13}& \text{Ravi's A/c}& \text{Dr.}& & 40,000& \\ & \text{To Bills Payable Ist A/c}& & & & 5,000\\ & \text{To Bills Payable IInd A/c}& & & & 10,000\\ & \text{To Bills Payable IIIrd A/c}& & & & 12,000\\ & \text{To Bills Payable IVth A/c}& & & & 13,000\\ & \text{(Four acceptances given )}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 7}& \text{Bills Payable IVth A/c}& \text{Dr.}& & 13,000& \\ & \text{To Ravi's A/c}& & & & 13,000\\ & \text{(Bill dishonoured on maturity)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 7}& \text{Interest A/c}& \text{Dr.}& & 81& \\ & \text{To Ravi's A/c}& & & & 81\\ & \text{(Interest at the rate of 12 \% due)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 10}& \text{Ravi's A/c}& \text{Dr.}& & 13,081& \\ & \text{To Cash A/c}& & & & 13,081\\ & \text{(Payment made to Ravi)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 6}& \text{Bills Payable Ist A/c}& \text{Dr.}& & 5,000& \\ & \text{To Ravi's A/c}& & & & 5,000\\ & \text{(Bill dishonoured on due date)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 16}& \text{Interest A/c}& \text{Dr.}& & 50& \\ & \text{To Ravi's A/c}& & & & 50\\ & \text{(Interest at the rate of 12 \% due)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 19}& \text{Ravi's A/c}& \text{Dr.}& & 5,050& \\ & \text{To Cash A/c}& & & & 5,050\\ & \text{(Payment made to Ravi)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 28}& \text{Bill Payable IInd A/c}& \text{Dr.}& & 10,000& \\ & \text{To Ravi's A/c}& & & & 10,000\\ & \text{(Bill doshonoured on due date)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 28}& \text{Interest A/c}& \text{Dr.}& & 132& \\ & \text{To Ravi's A/c}& & & & 132\\ & \text{(Interest due to Ravi)}& & & & \\ & \underset{–}{}& & & & \\ \text{Apr 10}& \text{Ravi's A/c}& \text{Dr.}& & 10,132& \\ & \text{To Cash A/c}& & & & 10,132\\ & \text{(Payment made to Ravi)}& & & & \\ & \underset{–}{}& & & & \\ \text{May 16}& \text{Bills Payable IIIrd A/c}& \text{Dr.}& & 12,000& \\ & \text{To Ravi's A/c}& & & & 12,000\\ & \text{(Bill dishonoured on due date)}& & & & \\ & \underset{–}{}& & & & \\ \text{May 16}& \text{Interest A/c}& \text{Dr.}& & 360& \\ & \text{To Ravi's A/c}& & & & 360\\ & \text{(Interest due rate 12 \% per annum)}& & & & \\ & \underset{–}{}& & & & \\ \text{May 19}& \text{Ravi's A/c}& \text{Dr.}& & 12,360& \\ & \text{To Cash A/c}& & & & 12,360\\ & \text{(Payment made to Ravi)}& & & & \end{array}$$
In the Books of Mustaq
Journal Entries

$$\begin{array}{cccccc}\text{Date}& \text{Particular}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & & \\ \text{Feb 13}& \text{Bills Receivable IInd A/c}& \text{Dr.}& & 10,000& \\ & \text{Discount Allowed A/c}& \text{Dr.}& & 200& \\ & \text{To Ravi's A/c}& & & & 10,200\\ & \text{(Acceptance received)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 28}& \text{Ravi's A/c}& \text{Dr.}& & 10,200& \\ & \text{To Bills Receivable A/c}& & & & 10,000\\ & \text{To Discount Received A/c}& & & & 200\\ & \text{(Bill dishonoured on due date and discount cancelled)}& & & & \end{array}$$
In The Books of Bank
Journal Entries
$$\begin{array}{cccccc}\text{Date}& \text{Particular}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2011& & & & & \\ \text{Mar 3}& \text{Bills Receivable A/c}& \text{Dr.}& & 13,000& \\ & \text{To Bill Sent for Collection A/c}& & & & 13,000\\ & \text{(Bill received from Ravi for collection)}& & & & \\ & \underset{–}{}& & & & \\ \text{Mar 7}& \text{Bill Sent for Collection A/c}& \text{Dr.}& & 13,000& \\ & \text{To Bills Receivable A/c}& & & & 13,000\\ & \text{(Bill dishonoured )}& & & & \end{array}$$