Question

Bela draws a bill for ₹ 2,00,000 on Prihaan for 4 months period. The bill is duly accepted and returned to Bela. One month after the date, Bela discounted the bill with bank @ 18% p.a.

On the due date, Prihaan dishonoured his acceptance. Bank paid noting charges ₹ 4,500. Prihaan requested Bela to renew the bill for further period of 2 months. Bela agreed and took the bill back from bank and received new acceptance for 40% amount of the bill with full amount of noting charges and cheque for 60% balance plus interest @ 12% p.a.

Write Journal of Bela and Prihaan for the above bill transactions.

Answer 1

In the Books of Bela

Journal Entries
Date	Particulars		L. F.	Debit  Amount  (₹)	Credit  Amount  (₹)
1.	Bills Receivable	Dr.		2,00,000
	To Prihaan's A/c				2,00,000
	(Being acceptance received from Prihaan for 4 months period)
2.	Cash/Bank A/c	Dr.		1,91,000
	Discount	Dr.		9,000
	To Bills Receivable A/c				2,00,000
	(Being bill discounted with the bank for the unexpired period of 3 months)
3.	Prihaan's A/c	Dr.		2,00,000
	To Cash/Bank A/c				2,00,000
	(Being entry passed for dishonour of the bill)
4.	Prihaan's A/c	Dr.		4,500
	To Cash/Bank A/c				4,500
	(Being noting charges paid and adjusted to Prihaan's A/c)
5.	Prihaan's A/c	Dr.		1,690
	To Interest A/c				1,690
	(Being interest due on balance amount from Prihaan)
6.	Bank A/c	Dr.		1,21,690
	To Prihaan's A/c				1,21,690
	(Being part payment along with interest due on balance amount received)
7	Bills Receivable A/c	Dr.		84,500
	To Prihaan's				84,500
	(Being new acceptance received for balance due plus noting charges)

In the books of Prihaan

Journal Entries
Date	Particulars		L. F.	Debit  Amount  (₹)	Credit  Amount  (₹)
1.	Bela's A/c	Dr.		2,00,000
	To Bills Payable A/c				2,00,000
	(Being acceptance given to Bela)
2.	Bill Payable A/c	Dr.		2,00,000
	To Bela's A/c				2,00,000
	(Being entry passed for dishonour of the bill)
3.	Noting Charges A/c	Dr.		4,500
	To Bela's A/c				4,500
	(Being noting charges due to Bela)
4	Interest A/c	Dr.		1,690
	To Bela's A/c				1,690
	(Being interest due on balance amount)
5.	Bela's A/c	Dr.		1,21,690
	To Bank A/c				1,21,690
	(Being part payment along with interest due paid to Bela)
6.	Bela's A/c	Dr.		84,500
	To Bills Payable				84,500
	(Being acceptance given to Bela)

Working Notes:

(1) Discount charged by the bank on discounting 1st bill = `2,00,000 xx  3/12 xx 18/100` (Period of bill is 4 months, but it is discounted 1 month later) = ₹ 9,000.

(2) Amount paid by Prihaan to Bela in Part payment = 60% of Bill amount = 60% of 2,00,000 = ₹ 1,20,000.

(3) Balance amount still due from Prihaan to Bela = 40% of Bill amount = 40% of 2,00,000 = ₹ 80,000.

(4) Interest is to be calculated on total amount due from Prihaan = Balance due + Unpaid amount noting charges
= 80,000 + 4,500

= ₹ 84,500.

Interest due = Balance amount × Unexpired period × Rate of interest 
= 84,500 × `2/12 xx 12/100` = ₹ 1,690.

(5) Amount paid by Prihaan to Bela = 1,20,000 + 1,690 = ₹ 1,21,690.