Question

X draws a bill on Y for ₹ 2,000 on 1st January, 2017, Y accepts the same and returns it to X. The bill was drawn by X in full settlement of a debt owing by Y amounted to ₹ 2,050. X discounts the bill on the same date with the Central Bank of India for ₹ 1,980. At maturity the bill was duly met by Y.
Give the entries in the books of X and Y.
Suppose the bill is dishonoured, what entries witll be passed?

Answer 1

Books of X
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Jan.01	Bills Receivable A/c	Dr.		2,000
	Discount Allowed A/c	Dr.		50
	To Y				2,050
	(Y’s acceptance was received and discount allowed)
Jan.01	Bank A/c	Dr.		1,980
	Discount Charges A/c	Dr.		20
	To Bills Receivable A/c				2,000
	(Y’s acceptance was discounted with bank)

Books of Y.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Jan.01	X	Dr.		2,050
	To Bills Payable A/c				2,000
	To Discount Received A/c				50
	(Bill drawn by X was accepted)
	Bills Payable A/c	Dr.		2,000
	To Bank A/c				2,000
	(Payment made for meeting the bill)

Journal entries – In case bill is dishonoured

Books of X.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Jan.01	Bills Receivable A/c	Dr.		2,000
	Discount Allowed A/c	Dr.		50
	To Y				2,050
	(Y’s acceptance was received and discount allowed)
Jan.01	Bank A/c	Dr.		1,980
	Discount Charges A/c	Dr.		20
	To Bills Receivable A/c				2,000
	(Y’s acceptance was discounted with bank)
	Y	Dr.		2,050
	To Bank A/c				2,000
	To Discount Allowed A/c				50
	(Y’s acceptance became dishonoured)

Books of Y
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2017
Jan.01	X	Dr.		2,050
	To Bills Payable A/c				2,000
	To Discount Received A/c				50
	(Bill drawn by X was accepted and discount received)
	Bills Payable A/c	Dr.		2,000
	Discount Received A/c	Dr.		50
	To X				2,050
	(Bill became dishonoured)