Question

On Jan 15, 2016 Raghu sold goods worth ₹ 35,000 to Devendra and drew up to the latter three bills of exchanges. The first bill was for ₹ 5,000 payable after one month, the second bill was for ₹ 20,000 payable after three months and third bill for balance amount for 4 months. Raghu endorsed the first bill in favour of his creditor Dewan in full settlement of a debt of ₹ 5,200. The second bill was discounted by Raghu @ 6 % p.a. and the third bill was retained by Raghu till the date of maturity. Devendra dishonoured the bill on maturity and the bank paid ₹ 30 as noting charges. Four days before the maturity of the third bill Raghu, sent the same for collection to his bank. The third bill was also dishonoured by Devendra and the bank paid ₹ 200 as noting charges. Five days after the dishonour of the bill Devendra paid the entire amount due to Raghu along with interest ₹ 1,000 for this purpose Devendra obtained a short term loan from his bank.
You are requested to record the necessary journal entries in the books of Raghu Devendra and Dewan and also prepare Devendra’s account in Raghu’s books and Raghu’s account in Devendra’s account.

Answer 1

Books of Raghu Journal
Date	Particulars	L.F.	Debit Amount  ₹	Credit Amount ₹
2016
Jan.15	Devendra Dr.		35,000
	To Sales A/c			35,000
	(Goods sold to Devendra)
Jan.15	Bills Receivable A/c Dr.		35,000
	To Devendra			35,000
	(Three bills received from Devendra-the first bill ₹ 5,000, the second bill ₹ 20,000, the third bill ₹ 10,000)
Jan.15	Dewan Dr.		5,200
	To Bills Receivable A/c			5,000
	To Discount Received A/c			200
	(The first bill endorsed to Dewan in full settlement of amount due to him)
Jan.15	Bank A/c Dr.		19,700
	Discount A/c Dr.		300
	To Bills Receivable A/c			20,000
	(The second bill discounted with bank at 6% p.a.)
Apr.18	Devendra Dr.		20,030
	To Bank A/c			20,030
	(The second bill dishonoured and bank paid ₹ 30 for noting charges)
May.14	Bill Sent for Collection A/c Dr.		10,000
	To Bills Receivable A/c			10,000
	(The third bill sent to bank for collection)
May.18	Davendra Dr.		10,200
	To Bill sent for collection A/c			10,000
	To Bank A/c			200
	(The third bill dishonoured and bank paid ₹ 200 as noting charges)
May.23	Davendra  Dr.		1,000
	To Interest A/c			1,000
	(Interest due to Devendra on account of bills dishonoured)
May.23	Cash A/c   Dr.		31,230
	To Davendra			31,230
	(Cash received from Davendra)

 

Dr.	Ledger Davendra's Account						Cr.
Date	Particulars	J.F.	Amount ₹	Date	Particulars	J.F.	Amount ₹
2016				2016
Jan.15	Sales		35,000	Jan.15	Bills Receivable		35,000
Apr.18	Bank		20,030	May.23	Cash		31,230
May.18	Bank Sent for Collection		10,000
May.18	Bank		200
May.23	Interest		1,000
			66,230				66,230

 

Books of Davendra Journal
Date	Particulars	L.F.	Debit Amount ₹	Credit Amount ₹
2016
Jan.15	Purchases A/c Dr.		35,000
	To Raghu			35,000
	(Goods bought from Raghu)
Jan.15	Raghu Dr.		35,000
	To Bills Payable A/c			35,000
	(Three bills drawn by Raghu accepted: the first bill for ₹ 5,000 payable after one month, the second for ₹ 20,000 payable after 3 months and the third for ₹ 10,000 payable after 4 months)
Feb.18	Bills Payable A/c Dr.		5,000
	To Cash			5,000
	(The first bill discharged on the due date)
Apr.18	Bills Payable A/c Dr.		20,000
	Noting Charges A/c Dr.		30
	To Raghu			20030
	(The second bill dishonoured and Noting Charges ₹ 30)
May.18	Bills Payable A/c Dr.		10,000
	Noting Charges A/c Dr.		200
	To Raghu			10,200
	(The third bill dishonoured and Noting Charges ₹ 200)
May.23	Interest A/c Dr.		1,000
	To Raghu			1,000
	(Interest charged ₹ 1,000 on account of bills dishonoured)
May.23	Cash A/c Dr.		31,230	31,230
	To Bank Loan A/c
	(Bank loan taken for settling Raghu's account)
May.23	Raghu Dr.		31,230
	To Cash A/c			31,230
	(Cash paid to Raghu)
May.23	Raghu  Dr.		31,230
	To Cash A/c			31,230
	(Cash paid to Raghu)

 

Dr.	Ledger Raghu’s Account						Cr.
Date	Particulars	J.F.	Amount ₹	Date	Particulars	J.F.	Amount ₹
2016				2016
Jan.15	Bills Payable		35,000	Jan.15	Purchases		35,000
May.23	Cash		31,230	Apr.18	Bills Payable		20,000
				Apr.18	Noting Charges		30
				May.18	Bills Payable		10,000
				May.18	Noting Charges		200
				May.18	Interest		1,000
			66,230				66,230

 

Books of Dewan Journal
Date	Particulars	L.F.	Debit Amount ₹	Credit Amount ₹
2016
Jan.15	Bills Receivable A/c Dr.		5,000
	Discount Allowed A/c Dr.		200
	To Raghu			5,200
	(Bill Receivable received from Raghu for one month and allowed him discount of ₹ 200)
Feb.18	Cash A/c Dr.		5,000
	To Bills Receivable A/c			5,000
	(Bill met on maturity)

Note:

In this question, there is no information regarding honour of the first bill of ₹ 5,000.

Therefore, it has been assumed that the first bill has been met on maturity.