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Question

X sells goods for ₹ 40,000 to Y on 1st January, 2019 and on the same day draws a bill on Y at three months for the amount. Y accepts it and returns it to X, who discounted it on 4th January, 2019 with his bank at 6% p.a. The acceptance is dishonoured on the due date and the noting charges were paid by bank being ₹ 200.
On 4th April, 2019, Y accepts a new bill at three months for the amount then due to X together with interest at 12% p.a.
Make Journal entries to record these transactions in the books of X.

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Solution

X’s Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

Jan.01

Y A/c

Dr.

40,000

To Sales A/c

40,000

(Goods sold on credit to Y)

Jan.01

Bills Receivable A/c

Dr.

40,000

To Y A/c

40,000

(Acceptance received from Y)

Jan.04

Bank A/c

Dr.

39,400

Discounting Charges A/c

Dr.

600

To Bills Receivable A/c

40,000

(Bill discounted at 6% p.a.)

Apr.04

Y A/c (40,000+200)

Dr.

40,200

To Bank A/c

40,200

(Bill dishonoured and noting charges of Rs 200 paid by bank)

Apr.04

Y A/c

Dr.

1,206

To Interest A/c

1,206

(Interest due for three months from Y on renewal of bill)

Apr.04

Bills Receivable (New) A/c (40,200+1,206)

Dr.

41,406

To Y A/c

41,406

(Acceptance received from Y)

Working Notes:

WN 1: Amount of Discounting Charges=40,000×6×3100×12=Rs 200

WN 2: Amount of Interest on Renewal of Bill=40,200×12×3100×12=Rs 1,206


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