Question

Maya owed Pari ₹ 36,000. Maya accepted a bill drawn by Pari for the amount at 4 months. Pari endorsed the same bill to Jyoti. Before due date Maya approached Pari for renewal of bill. Pari agreed on condition that ₹ 12,000 be paid immediately together with interest on the remaining amount of 8% p.a. for 3 months and Maya should accept a new bill for the balance amount. These arrangements were carried through. However, before the due date, Maya became insolvent and only 50% of the amount could be recovered from her estate. Give Journal Entries in the books of Pari.

Answer 1

In the books of Pari Journal Entries
Date/ No.	Particulars	L.F.	Debit Amount (₹)	Credit Amount (₹)
1.	Bills Receivable A/c   ...Dr.		36,000	-
	To Maya’s A/c		-	36,000
	(Being bill drawn and acceptance is received)
2.	Jyoti’s A/c   ...Dr.		36,000	-
	To Bills Receivable A/c		-	36,000
	(Being bill endorsed in favour of Jyoti)
3.	Maya’s A/c   ...Dr.		36,000	-
	To Jyoti’s A/c		-	36,000
	(Being the bill cancelled at the request of Maya)
4.	Cash/Bank A/c   ...Dr.		12,480	-
	To Interest A/c		-	480
	To Maya’s A/c		-	12,000
	(Being amount received towards part payment and interest)
5.	Bills Receivable A/c   ...Dr.		24,000	-
	To Maya’s A/c		-	24,000
	(Being new bill of remaining amount drawn and acceptance is received)
6.	Maya’s A/c   ...Dr.		24,000	-
	To Bills Receivable A/c		-	24,000
	(Being the bill dishonoured for non-payment)
7.	Cash/Bank A/c   ...Dr.		12,000	-
	Bad debts A/c   ...Dr.		12,000	-
	To Maya’s A/c		-	24,000
	(Being part payment received at the time of insolvency)

Working Note:

Calculation of interest on remaining amount ₹ 24,000 @ 8 % p.a. and for 3 months

I = `"PRN"/100 = 24,000 xx 8/100 xx 3/12 = ₹480`