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.
Solution
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.