Question

Kaveri sold goods to Gauri worth ₹ 48,000. Kaveri draws a bill for two months and Gauri accepted it on the same date. Kaveri discounted the bill with the bank @ 10% p.a. Bill was dishonoured on the due date and Gauri requested Kaveri to accept ₹ 8,000 and interest in cash on the remaining amount at 11% p.a. for 3 months. Kaveri agreed and for the balance Gauri accepted a new bill for 3 months. Gauri became insolvent and only 40% could be recovered from her estate.

Prepare Journal Entries in the books of Kaveri.

Answer 1

Date	Particulars	L.F.	Debit Amount (₹)	Credit Amount (₹)
1	Gauri’s A/c   ...Dr.		48,000
	To Sales A/c			48,000
	(Being goods sold on Credit)
2	Bills Receivable A/c   ...Dr.		48,000
	To Gauri’s A/c			48,000
	(Being bill drawn and acceptance received)
3	Bank A/c   ...Dr.		47,200
	Discount A/c   ...Dr.		800
	To Bills Receivable A/c			48,000
	(Being Gauri’s acceptance discounted @10% p.a. with bank)
4	Gauri’s A/c   ...Dr.		48,000
	To Bank A/c			48,000
	(Being Gauri’s acceptance dishonoured on due date)
5	Gauri’s A/c   ...Dr.		1,100
	To Interest A/c			1,100
	(Being the interest due on balance amount)
6	Cash A/c   ...Dr.		9,100
	To Gauri’s A/c			9,100
	(Being Cash accepted with interest from Gauri as part payment)
7	Bills Receivable A/c   ...Dr.		40,000
	To Gauri’s A/c			40,000
	(Being Gauri’s acceptance received for new bill)
8	Gauri’s A/c   ...Dr.		40,000
	To Bills Receivable A/c			40,000
	(Being New bill dishonoured)
9	Cash/Bank A/c   ...Dr.		16,000
	Bad debts/Deficiency A/c   ...Dr.		24,000
	To Gauri’s A/c			40,000
	(Being only 40% of the due amount received and balance amount treated as bad debts)
	Total		3,22,200	3,22,200

Working Notes:

(1) Calculation of discount @ 10% p.a. on ₹ 48,000 for 2 months.

= `48,000 xx 10/100 xx 2/12`

= ₹ 800

(2) Calculation of interest @ 11% p.a. on ₹ 40,000 for 3 months.

= `40,000 xx 11/100 xx 3/12`

= ₹ 1,100

(3) From the outstanding amount, only 40% can be recovered, i.e., 60% of ₹ 40,000 is Bad debts/Deficiency.

= `40,000 xx 60/100`

= ₹ 24,000