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On 14th May 2012 Rohit sold goods on credit to Devidas for Rs. 30,000. On the same date, Rohit draws a bill on Devidas for Rs. 30,000 at 4 months. - Book Keeping and Accountancy

Journal Entry
On 14th May 2012 Rohit sold goods on credit to Devidas for Rs. 30,000. On the same date, Rohit draws a bill on Devidas for Rs. 30,000 at 4 months. Devidas accepted it and returned to Rohit. On 17th June 2012, Rohit discounted the bill with his bank @ 10% p.a. On the due date, Devidas finds himself unable to make payment of the bill and requests Rohit to renew it. Rohit accepted the proposal on the condition that Devidas should pay Rs. 10,000 on account along with interest Rs. 500 in cash and should accept a new bill for the balance at 2 months. These arrangements were carried through. Give Journal Entries in the books of Rohit.
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Solution

In the books of Rohit Journal
Date Particulars L.F.

Debit Amount (Rs)

Credit Amount (Rs)

2012

May 14

 

Devidas                Dr.

   To Sales A/c

(Goods sold to Devidas on credit)

 

30,000

 

 

 

30,000

 

May 14

 

 

Bills Receivable A/c                  Dr.

    To Devidas

(Bill received from Devidas)

 

30,000

 

 

 

30,000

 

June 17

 

 

 

Bank A/c                 Dr.

Discounting Charges A/c         Dr.

    To Bills Receivable A/c

(Bills Receivable discounted with a bank)

 

29,250

750

 

 

 

 

30000

 

Sept. 17

 

 

Devidas               Dr.

     To Bank A/c

(Discounted bill receivable dishonoured)

 

30,000

 

 

 

30,000

 

Sept. 17

 

 

Devidas               Dr.

    To Interest A/c

(Interest due)

 

500

 

 

 

500

 

Sept. 17

 

 

 

Cash A/c               Dr.

Bills Receivable A/c (New)       Dr.

    To Devidas

(Cash and acceptance received)

 

10,500

20,000

 

 

 

 

30,500

 

Nov. 20

 

 

Cash A/c               Dr.

     To Bills Receivable A/c (New)

(Cash received)

 

20,000

 

 

 

20,000

 

Working Notes:

WN1 Calculation of Amount of Discount

(1) Amount of discount = 30,000 × 10/100 × 3/12 =  Rs 750

(2) Amount of new bill = Amount of dishonoured bill + Interest on balance Amount - Part Payment.

Amount of new bill = 30000 + 500 - 10500 = Rs 20,000 

Concept: Accounting Treatment - Discounting the Bill with the Bank Honour/Dishonour and Insolvency
  Is there an error in this question or solution?
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