Question

Mitali accepted a bill for ₹ 36,000 drawn by Manoj at 3 months. Manoj discounted the bill for ₹ 34,800. Before the due date Mitali approached Manoj for renewal of the bill. Manoj agreed on the condition that Mitali should pay ₹ 12,000 immediately and for the balance she should accept a new bill for 4 months along with interest ₹ 1,100. The arrangements were carried through. But on the due date of new bill, Mitali became insolvent and 35 paise in a rupee could be recovered from her estate.

Give journal entries in the books of Mitali.

Answer 1

In the books of Mitali Journal Entries
Date/ No.	Particulars	L.F.	Debit Amount (₹)	Credit Amount (₹)
1.	Manoj’s A/c   ...Dr.		36,000	-
	To Bills Payable A/c		-	36,000
	(Being our acceptance is given)
2.	Bills Payable A/c   ...Dr.		36,000	-
	To Manoj’s A/c		-	36,000
	(Being bill cancelled on our request)
3.	Manoj’s A/c   ...Dr.		12,000	-
	To Bank A/c		-	12,000
	(Being part payment made)
4.	Interest A/c   ...Dr.		1,100	-
	To Manoj’s A/c		-	1,100
	(Being the interest due on balance amount to be paid)
5.	Manoj’s A/c   ...Dr.		25,100	-
	To New Bills Payable A/c		-	25,100
	(Being the acceptance given for balance amount plus amount of interest)
6.	New Bills Payable A/c   ...Dr.		25,100
	To Manoj’s A/c			25,100
	(Being 35 % of the amount due paid and balance credited to deficiency A/c)
7.	Manoj’s A/c   ...Dr.		25,100
	To Cash/Bank A/c			8,785
	To Deficiency A/c			16,315
	(Being 35 % of the amount due paid and balance credited to deficiency A/c)
	Total		1,60,400	1,60,400

Working Notes:

(1) Amount of New bill = (Amount of old bill) + (Interest) – (Part payment)

= 36,000 + 1,100 – 12,000

= ₹ 25,100

(2) Amount recovered by Manoj = `25,100 × 35/100 = ₹ 8,785`

Bad debts incurred = Amount due – Amount recovered

= 25,100 – 8,785

= ₹ 16,315