Maharashtra State BoardHSC Commerce 12th Board Exam
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Sayali Sold Goods on Credit to Manali of Rs 40,000. Sayali Draws a Bill on Manali for 4 Months for the Amount Due. Manali Accepted the Bill and Returned It to Sayali. After a Month, - Book Keeping and Accountancy

Sum

Sayali sold goods on credit to Manali of `Rs 40,000. Sayali draws a bill on Manali for 4 months for the amount due. Manali accepted the bill and returned it to Sayali. After a month, Sayali discounted the bill with her bank at 12% p.a.

On the due date, bank informed that the bill is dishonoured and bank paid the noting charges  300. Manali requested Sayali to renew the bill. Sayali agreed on conditions that Manali should pay `Rs 20,000 in cash along with noting charges and accept a new bill for the balance amount with interest at 15% p.a. for 3 months.

These arrangements were carried through. Before the due date Manali was declared insolvent and only 40% of the amount due could be recovered from her private estate as final dividend. Give Journal Entries in the books of Sayali.

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Solution

Journal Entries in the books of Sayali.
Date
Particulars
L.F.
Debit (Rs.)
Credit (Rs.)
(1)
Manali’s A/c ....... Dr.
 
40000
 
 
To Sales A/c
   
40000
 
[Being the goods are sole]
     
         
(2)
Bills Receivable A/c .... Dr.
 
40000
 
 
To Manali’s A/c
   
40000
 
[Being the bill is drawn ]
     
         
(3)
Bank A/c .... Dr.
 
38800
 
 
Discount A/c ..... Dr
 
1200
 
 
To Bills Receivable A/c
   
40000
 
[Being the bill is discounted]
     
         
(4)
Manali’s A/c .... Dr.
 
40300
 
 
To Bank A/c
   
40300
 
[Being the bill is dishonoured and noting charges charged]
     
         
(5)
Manali’s A/c .... Dr.
 
750
 
 
To Interest A/c
   
750
 
[Being the interest is charged]
     
         
(6)
Cash A/c ..... Dr.
 
20300
 
 
To Manali’s A/c
   
20300
 
[Being the part payment is made along with Noting charges]
     
         
(7)
Bills Receivable A/c .... Dr.
 
20750
 
 
To Manali’s A/c
   
20750
 
[Being the new bill is drawn along with interest]
     
         
(8)
Manali’s A/c .... Dr.
 
20750
 
 
To Bills Receivable A/c
   
20750
 
[Being the bill is dishonoured]
     
         
(9)
Cash A/c ... Dr.
 
8300
 
 
Bad debts A/c .... Dr.
 
12450
 
 
To Manali’s A/c
   
20750
 
[Being the drawee become insolvent and only 40 % of the amount could be recovered from her private estate. ]
     

Notes

Amount of Discount = 40000 × `12/100 xx 3/12` = Rs 1200.

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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