Question

Harbhajan draws a bill on Manmit for Rs 8,000 at 3 months. Manmit accepts and return to Harbhajan. Harbhajan then sends the bill towards his bank for collections.
 On due date Manmit find himself unable to make payment of the bill and request Harbhajan to renew it. He accepted the proposal on the condition that Manmit should pay Rs 2,000 along with interest @ 15% p.a. in cash and should accepts new bill for the balance at 2 months. These arrangements were carried through. One month before Manmit retired his acceptance @ 12% p.a.
Give journal entries and Manmit’s Account in the books of Harbhajan.

Answer 1

In the Books of Harbhajan

Journal Entries
Date	Particulars	L.F.	Amount (Rs.)	Amount (Rs.)
	Bills Receivable A/c                                  Dr.		8,000
	To Manmit A/c			8,000
	(Bill drawna and accepted.)
	Manmit A/c                                           Dr.		8,000
	To Bills Receivable A/c			8,000
	(Bill dishonoured on due date.)
	Manmit A/c                             Dr.		150
	To Interest A/c			150
	(Interest charged for renewal of bill)
	Cash A/c                                 Dr.		2,150
	Bills Receivable A/c                 Dr		6,000
	To Manmit A/c			8,150
	(Rs 2,000 along with the interest received in advance and for rest of the amount new bill was drawn and accepted)
	Cash A/c                                  Dr.		5,940
	Rebate A/c                               Dr.		60
	To Bills Receivable A/c			6,000
	(Bill retired by Manmit before one month @ 12% per annum)

              

Dr	Manmit's Account						Cr.
Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
	Balance b/d		8,000		Bills Receivable A/c		8,000
	Bills receivable A/c		8,000		Cash A/c		2,150
	Interest A/c		150		Bills Receivable		6,000
			16,150				16,150