Question

X sells goods for Rs 40,000 to Y on 1st January, 2012 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, 2018 with his bank at 6% p.a. The acceptance is dishonoured on the due date and the noting charges were paid by bank being Rs. 200. On 4th April, 2018, 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.

Answer 1

X’s Journal

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2012
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:

1. Amount of Discounting Charges = \(\frac{40,000\times 6 \times 3}{100 \times 12}\)

= Rs 600

2. Amount of Interest on Renewal of Bill = \(\frac{40,200 \times 12 \times 3}{100 \times 12}\)

= Rs 1,206

Answer 2

Working Notes: