NCERT Solutions for Class 11-commerce Accountancy Part I Chapter 8 - Bills of Exchange

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Chapter 8 - Bills of Exchange Exercise 310

Question SA 1

Name any two types of commonly used negotiable instruments.

Solution SA 1

Cheques and Bills of exchange are the commonly used negotiable instruments.

Question SA 2

Write two points of distinction between bills of exchange and promissory note.

Solution SA 2

 

Bills of Exchange

Promissory Note

A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker directing a certain person to pay a certain amount of money only to, or to the order of a certain person or to the bearer of the instrument.

A promissory note is an instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.

There are three parties involved, namely drawer, drawee and payee.

There are two parties involved, namely maker and payee.

 

Question SA 3

State any four essential features of bill of exchange.

Solution SA 3

Essential features of bills of exchange are as follows:

  1. A bill of exchange is a written order to make payment
  2. It is an unconditional order to make payment by a person i.e. drawee
  3. The amount of bill of exchange and the date of payment are certain
  4. It is signed by the drawer of the bill
  5. It is accepted by the drawee by signing on it
  6. The amount specified in the bill of exchange is payable either on demand or on the expiry of a fixed period
  7. The amount specified in the bill is payable either to a certain person or to his order or to the bearer of the bill
  8. It is stamped as per legal requirements
Question SA 4

State the three parties involved in a bill of exchange.

Solution SA 4

There are three parties in a bill of exchange:

  1. Drawer is the person who makes the bill of exchange. She/he is a person who has granted credit to the person on whom the bill of exchange is drawn. The drawer is entitled to receive money from the drawee (acceptor).
  2. Drawee is the person on whom the bill of exchange is drawn for acceptance and to whom credit has been granted by the drawer. He/she is liable to pay money to the creditor/drawer.
  3. Payee is the person who receives the payment from the drawee. Usually the drawer and the payee are the same person.

 

Question SA 5

What is meant by maturity of a bill of exchange?

Solution SA 5

The date calculated after adding 3 days of grace to the due date of a bill is called the date of maturity of a bill. It is to be noted that when a bill is to be payable on demand/at sight, then days of grace is not applicable. When the period of a bill is mentioned in days, the maturity of bill is calculated in days. Similarly, when the period of a bill is mentioned in months, the maturity of bill is calculated in months. In certain cases, when the maturity date of any bill falls on a public holiday, then the maturity date of the bill will be the previous business day.

Question SA 6

What is meant by dishonour of a bill of exchange?

Solution SA 6

When the drawee of the bill fails to make the payment on the maturity date of the bill, then the bill is said to have been dishonoured. Hence, liability of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are as follows:

In the books of drawer

Drawee's A/c

Dr.

          To Bills Receivable A/c

 

(Being bill dishonoured)

 

 

In the books of drawee

Bills Payable A/c

Dr.

         To Drawer's A/c

 

(Being bill dishonoured)

 

 

Question SA 7

Name the parties to a promissory note

Solution SA 7

There are two parties to a promissory note:

  1. Maker- The person who makes the note and undertakes to pay the amount.
  2. Payee- The person who receives the payment.
Question SA 8

What is meant by acceptance of a bill of exchange?

Solution SA 8

A bill of exchange is a written instrument which contains an unconditional order directing a person to pay a certain amount on an agreed date. In other words, it is drawn by the creditor on her/his debtors to make a payment of a certain amount on the mentioned date. Such a bill comes into existence after the consent of both the parties. A bill cannot come into existence without the acceptance of a debtor. Hence, the debtor of the bill has to accept the terms of the bill, sign the same and make it a legal document.

Question SA 9

What is noting of a bill of exchange?

Solution SA 9

When the drawee of the bill fails to make the payment on the maturity date of the bill, then the bill is said to have been dishonoured. To have a legal proof of the dishonour, the bill gets noted by the notary public who is approved by the central/state government. The notary public charges fees called the noting charges for noting and protesting the bill of exchange of its dishonour.

Question SA 10

What is meant by renewal of a bill of exchange?

Solution SA 10

When the drawee does not have enough funds to make the payment, he may approach the drawer and ask for an extension of time for the payment. If the drawer agrees, then a new bill is drawn which is known as renewal of bill. The new bill may include interest for the extended period.

Question SA 11

Give the performa of a Bills Receivable Book.

Solution SA 11

 

Serial Number of Bill

Date Received

Date of Bill

Received From Whom

Drawer

Acceptor

Where payable

Term

Due date

Ledger Folio

Amount

Cash Book Folio

Remarks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question SA 12

Give the performa of a Bills Payable Book.

Solution SA 12

 

Serial Number of Bill

Date of Bill

Given To Whom

Drawer

Payee

Payable Where

Term of Bill

Due Date

Ledger Folio

Amount Paid

Date

Cash Book Folio

Remarks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question SA 13

What is retirement of a bill of exchange?

Solution SA 13

When the drawee of the bill pays off the amount of the bill before the maturity of the bill it is called retirement of the bill. Holder of the bill may give discount for such earlier payment which is called as 'rebate'.

Entry in the books of the holder of the bill

 

Cash A/c

Dr.

Rebate A/c

Dr.

       To Bills Receivable A/c

 

(Being bill amount received before maturity and rebate allowed for retirement of the bill)

 

 

Entry in the books of the acceptor (drawee) of the bill

 

Bills Payable A/c

Dr.

      To Cash A/c

 

      To Rebate A/c

 

(Being bill paid and rebate received on retirement of the bill)

 

 

 

 

Question SA 14

Give the meaning of rebate.

Solution SA 14

If the drawee wishes to pay the bill before the due date of the bill to the holder and the holder accepts such request, then due to the early payment, the holder may give some discount to the drawee. Such a discount is termed as rebate.

Question SA 15

Give the performa of a Bill of Exchange.

Solution SA 15

Performa of a Bill of exchange is given below.

Ncert Solutions Cbse Class 11-commerce Accountancy Part I Chapter - Bills Of Exchange 

 

Question LA 1

A bill of exchange must contain "an unconditional promise to pay". Do you agree with a statement?

Solution LA 1

According to Negotiable Instrument Act, 1981, "A bill of exchange is defined as an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."

 

As the definition mentions the bill is an unconditional order to pay i.e. no conditions should be applicable with respect to the payment and the drawee of the bill is obliged to pay the maker of the bill. This is one of the main features of a bill of exchange. All the conditions with respect to the bill, for example; the amount, the date of payment, the parties involved needs to be specified with clarity.

Question NUM 1

On Jan 01, 2016 Rao sold goods Rs.10,000 to Reddy. Half of the payment was made immediately and for the remaining half Rao drew a bill of exchange upon Reddy payable after 30 days. Reddy accepted the bill and returned it to Rao. On the due date Rao presented the bill to Reddy and received the payment. Journalise the above transactions in the books Rao and prepare of Rao's account in the books of Reddy.

Solution NUM 1

 

Book of Rao

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 01 

Reddy A/c

Dr. 

 

10,000 

  

  

----------To Sales A/c

     

10,000 

  

(Being goods sold to Reddy)

     

  

  

 

  

   

  

Jan 01 

Cash A/c

Dr. 

 

5,000 

  

  

----------To Reddy A/c

     

5,000 

  

(Being cash received from Reddy)

     

  

  

       

  

Jan 01 

Bills Receivable A/c

Dr. 

 

5,000 

  

  

----------To Reddy A/c

     

5,000 

  

(Being bill received and accepted from Reddy for 30 days)

     

  

  

       

  

Feb 03 

Cash A/c

Dr. 

 

5,000 

  

  

----------To Bills Receivable A/c

     

5,000 

 

(Being Reddy's acceptance met on due date)

       

  

 

  

 

  

  

 

Books of Reddy

Rao's Account 

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount 

Rs. 

Date 

Particulars 

J.F. 

Amount 

Rs. 

2016 

     

2016 

 

  

  

Jan 01 

To Cash A/c

  

5,000 

Jan01 

By Purchases A/c

  

10,000 

Jan 01 

To Bills Payable A/c

  

5,000 

 

 

 

 

  

  

  

  

  

  

  

  

 

 

 

10,000

     

10,000 

 

 

Question LA 5

Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.

Solution LA 5

When the drawee of the bill pays off the amount of the bill before the maturity of the bill it is called retirement of the bill. Holder of the bill may give discount for such earlier payment which is called as 'rebate'.

As the holder of the bill provides the rebate, it is a loss for the holder of the bill and hence it is debited in the books of the holder when payment is received.

 

Cash A/c

Dr.

Rebate A/c

Dr.

---------To Bills Receivable A/c

 

(Being payment received and rebate allowed for early payment)

 

 

The rebate is a gain for the drawee; so, it is credited in the books of the drawee.

Bills Payable A/c

Dr.

            To Cash A/c

 

            To Rebate A/c

 

(Being bill paid before the due date and rebate received for early payment)

 

 

Question LA 6

Explain briefly the purpose and advantages of maintaining of a Bills receivable book.

Solution LA 6

Bills receivable book is a special purpose book that is maintained to keep records of bills received from the debtors. It contains details such as acceptor's name, date of bill, due date and amount. for future references.

Benefits of maintaining the bill receivable book:

  1. Source of information: The general information related to the each of the bills i.e. the amount, due date and name of the drawee are recorded at one place and hence are easily accessible.
  2. Avoid fraud: As the details of all the bills are recorded at one place, possibility of fraud is reduced.
  3. Responsibility: The person who maintains the bills receivable book will also be responsible for any errors or omissions. Therefore, higher degree of accountability and responsibility exists. Also, if any error is detected, then it can be fixed quickly.
  4. Time saving: Recording of bills receivable through the bills receivable book takes lesser time than that of journal entry.
Question LA 7

Briefly explain the benefits of maintaining a bills payable book and state how is its posting is done in the ledger.

Solution LA 7

A bills payable book is a special purpose book, maintained to keep records of acceptance of bills, given to the creditors. It contains details of the amount, date of bill, due date and name of the drawer to whom acceptance is given for future references.

Benefits of Maintaining Bills Payable Book

  1. Source of information: The general information related to the each of the bills i.e. the amount, due date and name of the drawee are recorded at one place and hence are easily accessible.
  2. Avoid fraud: As the details of all the bills are recorded at one place, possibility of fraud is reduced.
  3. Time saving: Recording of bills receivable through the bills receivable book takes lesser time than that of journal entry.
  4. Responsibility: As the transactions are recorded by the same person errors if any can be easily detected and rectified. This leads to enhancement of responsibility and accountability of the accountant.
Question LA 2

Briefly explain the effects of dishonour and noting of a bill of exchange.

Solution LA 2

On the maturity of the bill, when the acceptor of the bill fails to make the payment, it is said that the bill is dishonoured. This restores the liability of the acceptor.

Entry in the books of drawer:

Drawee A/c

Dr.

-----------To Bills Receivable A/c

 

(Being bill dishonoured)

 

 

Entry in the books of drawee:

Bills Payable A/c

Dr.

-----------To Drawer A/c

 

(Being bill dishonoured)

 

 

Noting charges is the fee paid to the notary public for noting and protesting the bill of exchange of its dishonour.

Effect of Noting charges in the books of the drawer:

Drawee A/c

Dr.

-----------To Bills Receivable A/c

 

-----------To Cash A/c (Noting charges)

 

(Being bill dishonoured and Noting charges paid)

 

 

In the books of drawee:

Bills Payable A/c

Dr.

Noting charges A/c

Dr.

-----------To Drawer A/c

 

(Being bill dishonoured and Noting charges due)

 

 

Question LA 3

Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.

Solution LA 3

The procedure to calculate the date of maturity of a bill of exchange is given below.

  1. Determine the date on which the bill will be due.
  2. Add three days of grace to the due date of the bill. It is standard process to add days of grace.
  3. The date obtained after adding the three days to the due date is called the maturity date of the bill.

However, the application of the days of grace depend on the following situations:

  1. Days of grace are not applicable when a bill is payable 'at sight' or on demand.
  2. When the period of the bill is mentioned in months, the calculation of the maturity date will be in the terms of calendar month.
  3. When the period of the bill is mentioned in days, the calculation of the maturity date is also calculated in days including the date of payment but excluding the date of transaction.
  4. If the bill matures on a national holiday or Sunday, then the preceding business day becomes the maturity date of the bill.
  5. For example, if the maturity date of a bill is calculated as on 15th August, 2015 then the preceding day that is 14th August, 2015 will be considered as the maturity date.
  6. If the maturity day happens to be an emergency holiday declared under the Negotiable Instruments Act, 1881, then the next working day is to be considered as the maturity date.
Question LA 4

Distinguish between bill of exchange and promissory note.

Solution LA 4

 

Bills of Exchange

Promissory Note

It is an order to pay.

It is a promise to pay.

There are three parties involved, drawer, acceptor and payee.

There are two parties involved, maker and payee.

It is drawn by the creditor.

It is drawn by the debtors.

It needs acceptance by the drawee.

Acceptance is not required.

Drawer and payee may be the same.

Promissor cannot be the payee.

In case of dishonour of the bill, the bill may get noted.

Noting is not necessary.

 

Chapter 8 - Bills of Exchange Exercise 311

Question NUM 2

On Jan 01, 2016, Shankar purchased goods from Parvati for Rs.8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary Journal entries in the books of Parvati and Shankar.

Solution NUM 2

Book of Parvati

Journal

Date 

 Particulars 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 01 

Shankar A/c

Dr. 

 

8,000 

  

  

----------To Sales A/c

     

8,000 

  

(Being goods sold to Shankar)

     

  

  

 

     

  

Jan 01 

Bills Receivable A/c

Dr. 

 

8,000 

  

  

----------To Shankar A/c

     

8,000 

  

(Being promissory note received from Shankar for three months)

     

  

  

 

     

  

Apr 05 

Cash A/c

Dr. 

 

8,000 

  

  

----------To Bills Receivable A/c

     

8,000 

  

(Being cash received for promissory note one day after the maturity date on account of holiday declared by govt.)

 

   

  

  

  

  

 

  

 
             

 

 

Book of Shankar

Journal

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 01 

Purchases A/c

Dr. 

 

8,000 

  

  

----------To Parvati A/c

     

8,000 

  

(Being goods purchased from Parvati)

     

  

  

 

     

  

Jan 01 

Parvati A/c

Dr. 

 

8,000 

  

  

----------To Bills Payable A/c

     

8,000 

  

(Being promissory note for three months sent to Parvati)

     

  

 

 

     

  

Apr 5

Bills Payable A/c

Dr.

 

8,000

 
 

----------To Cash A/c

     

8,000

 

(Being cash paid on maturity promissory note)

       

 

 

Question NUM 3

Vishal sold goods for Rs.7,000 to Manju on Jan 05, 2016 and drew upon her a bill of exchange payable after 2 months. Manju accepted Vishal's draft and handed over the same to Vishal after acceptance. Vishal immediately discounted the bill with his bank @12% p.a. On the due date Manju met her acceptance. Journalise the above transactions in the books of Vishal and Manju.

Solution NUM 3

Book of Vishal

Journal

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 05 

Manju A/c

Dr. 

 

7,000 

  

  

----------To Sales A/c

     

7,000 

  

(Being goods sold to Manju)

     

  

  

 

     

  

Jan 05 

Bills Receivable A/c

Dr. 

 

7,000 

  

  

----------To Manju A/c

     

7,000 

  

(Being bill received with Manju's acceptance for two months)

     

  

  

 

     

  

Jan 05 

Bank A/c

Dr. 

 

6,860 

  

  

Discount A/c

Dr. 

 

140 

7,000 

  

----------To Bills Receivable A/c

     

  

  

(Being bill receivable discounted with the bank @ 12 % p.a. for two months)

   

  

  

 

Note: On payment of the bill, no entry will be made.

 

 

Book of Manju

Journal

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 05 

Purchases A/c

Dr. 

 

7,000 

  

  

----------To Vishal A/c

     

7,000 

  

(Being goods purchased from Vishal)

     

  

  

 

     

  

Jan 05 

Vishal A/c

Dr. 

 

7,000 

  

  

----------To Bills Payable A/c

     

7,000 

  

(Being bill accepted drawn by Vishal)

     

  

 

 

 

 

 

 

Mar08

Bills Payable A/c

Dr.

 

7,000

 

  

----------To Bank A/c

     

7,000

 

(Being amount of bill payable paid to bank on maturity)

       

 

 

Question NUM 4

On Feb 01, 2016, John purchased goods for Rs.15,000 from Jimmi. He immediately made a payment of Rs.5,000 by cheque and for the balance accepted the bill of exchange drawn upon him by Jimmi. The bill of exchange was payable after 40 days. Five days before the maturity of the bill, Jimmi sent the same to his bank for collection. The bank duly presented the bill to John on the due date who met the bill. The bank informed the same to Jimmi. Prepare John's account in the books of Jimmi and Jimmi's account in the books of John.

Solution NUM 4

 

Book of Jimmi

Journal

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Feb 01 

John A/c

Dr. 

 

15,000 

  

  

 ----------To Sales A/c

     

15,000 

  

(Being goods sold to John)

     

  

  

 

     

  

Feb 01 

Bank A/c

Dr. 

 

5,000 

  

  

 ----------To John A/c

     

5,000 

  

(Being cheque received for Rs.5,000 from John)

     

  

  

 

     

  

Feb 01 

Bills Receivable A/c

Dr. 

 

10,000 

  

  

 ----------To John A/c

     

10,000 

  

(Being bill received from John for 40 days)

   

  

  

  

 

     

  

Mar 11 

Bill Sent for Collection A/c

Dr. 

 

10,000 

  

  

 ----------To Bills Receivable A/c

   

  

10,000 

  

(Being John's acceptance sent to bank for collection)

     

  

  

 

     

  

Mar 16 

Bank A/c

Dr. 

 

10,000 

  

  

 ----------To Bill Sent for Collection A/c

     

10,000 

  

(Being John's acceptance met on due date and bank received the payment)

 

   

  

 

 

Ledger

John's Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2016 

  

   

2016 

  

 

  

Feb 01 

To Sales A/c

 

15,000

Feb 01

By Bank A/c

 

5,000

       

Feb 01

By Bills Receivable A/c

 

10,000

               
     

15,000

     

15,000

 

 

Book of John

Journal 

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Feb 01 

Purchases A/c

Dr. 

 

15,000 

  

  

 ----------To Jimmi A/c

     

15,000 

  

(Being goods purchases from Jimmi)

     

  

  

 

     

  

Feb 01 

Jimmi A/c

Dr. 

 

5,000 

  

  

----------To Bank A/c

     

5,000 

  

(Being cheque paid to Jimmi)

     

  

  

 

     

  

Feb 01 

Jimmi A/c

Dr. 

 

10,000 

  

  

 ----------To Bills Payable A/c

     

10,000 

  

(Being bill draw accepted for 40 days)

   

  

  

  

 

     

  

Mar 16 

Bills Payable A/c

Dr. 

 

10,000 

  

  

 ----------To Bank A/c

   

  

10,000 

  

(Being payment made on maturity of the bill to bank)

     

  

 

 

Ledger

Jimmi's Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2016 

  

   

2016 

  

 

  

Feb 01 

To Bank A/c

 

5,000

Feb 01

By Purchases A/c

 

15,000

Feb 01

To Bills Payable A/c

 

10,000

       
               
     

15,000

     

15,000

 

 

Question NUM 5

On Jan 15, 2015, Kartar Sold goods for Rs.30,000 to Bhagwan and drew upon him three bills of exchanges of Rs.10,000 each payable after one month, two month, and three months respectively. The first bill was retained by Kartar till its maturity. The second bill was endorsed by him in favour of his Cr. or Ratna and the third bill was discountedby him immediately @ 6% p.a. All the bills were met by Bhagwan. Journalise the above transactions in the books of Kartar and Bhagwan. Also prepare ledger accounts in books of Kartar and Bhagwan.

Solution NUM 5

 

Books of Kartar

Journal Entries

Date 

Particulars 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2015 

  

 

 

  

  

Jan 15 

Bhagwan 

Dr. 

 

30,000 

  

  

----------To Sales A/c

 

 

 

30,000 

  

(Being goods sold to Bhagwan)

 

 

 

  

  

 

 

 

 

  

Jan 15 

Bills Receivable A/c

Dr. 

 

30,000 

  

  

----------To Bhagwan A/c

 

 

 

30,000 

  

(Being three bills of Rs.10,000 each, received from Bhagwan the first bill for one month, second bill for two months and third bill for three months)

 

 

 

  

  

   

 

 

  

Jan 15 

Ratna A/c

Dr. 

 

10,000 

  

  

 ----------To Bills Receivable A/c

 

 

 

10,000 

  

(Being the second bill endorsed to Ratna)

 

 

  

  

  

 

 

 

 

  

Jan 15 

Bank A/c

Dr. 

 

9,850 

  

  

Discount A/c

Dr. 

 

150 

  

  

----------To Bills Receivable A/c

 

 

 

10,000 

  

(Being bill discounted at 6% p.a.)

 

 

 

  

 

 

 

 

 

 

Feb 18 

Cash A/c

Dr. 

 

10,000 

  

  

----------To Bills Receivable A/c

 

 

 

10,000 

  

(Being the first bill met by Bhagwan, on due date)

 

 

 

  

             

 

 

Bhagwan's Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Jan 15 

To Sales A/c

 

30,000

Jan 15

By Bills Receivable A/c

 

30,000

               
     

30,000

     

30,000

 

 

Ratna's Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015

  

 

  

Jan 15 

To Bills Receivable A/c

 

10,000

Jan 31

 By Balance c/d

 

10,000

               
     

10,000

     

10,000

 

 

 

Bills Receivable Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Jan 15 

To Bhagwan A/c

 

30,000

Jan 15

By Ratna A/c

 

10,000

       

Jan 15

By Bank A/c

 

9,850

       

Jan 15

By Discount A/c

 

150

       

Jan 15

By Cash A/c

 

10,000

 

 

 

 

 

 

 

 

     

30,000

     

30,000

 

 

Cash Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Feb 18 

To Bills Receivable A/c

 

10,000

Feb 28

By Balance c/d

 

10,000

               
     

10,000

     

10,000

 

 

Bank's Account 

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Jan 15 

To Bills Receivable A/c

 

9,850

Jan 31

By Balance c/d

 

9,850

               
     

9,850

     

9,850

 

 

Books of Bhagwan

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2015 

  

 

 

  

  

Jan 15 

Purchases A/c

Dr. 

 

30,000 

  

 

  To Kartar A/c

 

 

 

30,000 

 

(Being good purchased from Kartar on Cr.)

 

 

 

  

 

 

  

 

 

  

Jan 15 

Kartar A/c

Dr. 

 

30,000 

  

 

  To Bills Payable A/c

 

 

 

30,000 

 

(Being three bill Rs.10,000 each drawn by Kartar the first bill for one month, the second bill for two months and the third bill for three months, accepted and returned them to Kartar)

 

 

 

  

   

 

     

Feb 18 

Bills Payable A/c

Dr.

 

10,000

 
 

 To Cash A/c

     

10,000

 

(Being first was paid on due date)

       
           

Mar18

Bills Payable A/c

Dr.

 

10,000

 
 

 To Bank A/c

     

10,000

 

(Being second bill was paid on due to Ratna)

       
           

Apr 18

Bills Payable A/c

Dr.

 

10,000

 
 

 To Bank A/c

     

10,000

 

(Being third bill was paid on due to bank)

       

 

Kartar's Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Jan 15 

To Bills Payable A/c

 

30,000

Jan 15

By Purchases A/c

 

30,000

 

 

           
     

30,000

     

30,000

 

 

 

Bills Payable Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Feb 18 

To Cash A/c

 

10,000

Jan 15

By Kartar A/c

 

30,000

Mar 18

To Bank A/c

 

10,000

       

Apr 18

To Bank A/c

 

10,000

       
     

30,000

     

30,000

 

 

Cash Account

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Feb28 

To Balance c/d

 

10,000

Feb 18

By Bills Payable A/c

 

10,000

               
     

10,000

     

10,000

 

 

Bank Account 

Dr. 

           

Cr. 

Date 

Particulars 

J.F. 

Amount Rs. 

Date 

Particulars 

J.F. 

Amount Rs. 

2015 

  

   

2015 

  

 

  

Apr 31 

To Balance c/d 

 

20,000

Mar18

By Bills Payable A/c

 

10,000

       

Apr18

By Bills Payable A/c

 

10,000

               
     

20,000

     

20,000

 

Question NUM 6

On Jan. 01, 2016 Arun sold goods for Rs.30,000 to Sunil. 50% of the payment was made immediately by Sunil on which Arun allowed a cash discount of 2%. For the balance Sunil drew a promissory note in favour of Arun payable after 20 days. Since, the date of maturity of bill was a public holiday; Arun presented the bill on a day, as per the provisions of Negotiable Instrument Act which was met by Sunil. State the date on which the bill was presented by Arun for payment and jounalise the above transactions in the books of Arun and Sunil.

Solution NUM 6

As per the provisions of Negotiable Instrument Act, when the maturity date of any bill falls on a public holiday then the maturity date of the bill will be the previous business day.

20 days after Jan 01, 2016 is 21st Jan, 2016. Adding 3 days of grace, we get the maturity date as 24th Jan, 2016. Previous business day is 23rd Jan, 2016.

 

 

Book of Arun

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016

  

   

  

  

Jan 01 

Sunil A/c

Dr. 

 

30,000 

  

  

 ---------To Sales A/c

     

30,000 

  

(Being goods sold to Sunil)

     

  

  

 

     

  

Jan 01 

Cash A/c

Dr. 

 

14,700 

  

  

Discount Allowed A/c

Dr. 

 

300 

  

  

 ---------To Sunil A/c

     

15,000 

  

(Being half of the amount due from Sunil was received and allowed him 2% cash discount)

 

   

  

  

 

     

  

Jan 01 

Bills Receivable A/c

Dr. 

 

15,000 

  

  

---------To Sunil A/c

     

15,000 

  

(Being promissory note received for balance amount due from Sunil)

 

 

  

  

  

 

     

  

Jan 23 

Cash A/c

Dr. 

 

15,000 

  

  

---------To Bills Receivable A/c

     

15,000  

  

(Being cash received from Sunil one day before the maturity date due to public holiday)

 

   

  

 

 

 

Book of Sunil

Journal Entries

Date 

Particulars 

 

L.F. 

Dr.

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan01 

Purchases A/c

Dr. 

 

30,000 

  

  

---------To Arun A/c

     

30,000 

  

(Being goods purchased from Arun)

       
           

Jan 01

Arun A/c

Dr.

 

15,000

 
 

---------To Cash A/c

     

14,700

 

---------To Discount Received A/c

     

300

 

(Being half amount due to Arun paid by cheque and 2% discount allowed by him)

       
           

Jan 01

Arun A/c

Dr.

 

15,000

 
 

---------To Bills Payable A/c

     

15,000

 

(Being promissory note issued in favour of Arun for twenty days)

       
           

Jan 23

Bills Payable A/c

Dr.

 

15,000

 
 

---------To Cash A/c

     

15,000

 

(Being promissory note met one day before the maturity day)

       

 

 

Question NUM 7

Darshan sold goods for Rs.40,000 to Varun on 8.1.2016 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date the bill was met by Varun. Record the necessary Journal entries in the books of Darshan and Varun in the following circumstances.

  1. When the bill was retained by Darshan till the date of its maturity.
  2. When Darshan immediately discounted the bill @ 6% p.a. with his bank.
  3. When the bill was endorsed immediately by Darshan in favour of his Cr. or Suresh.
  4. When three days before its maturity, the bill was sent by Darshan to his bank for collection.
Solution NUM 7

Case i: When the bill was retained by Darshan till the date of its maturity

 

Books of Darshan

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Varun A/c

Dr. 

 

40,000 

  

  

---------To Sales A/c

     

40,000 

  

(Being goods sold to Varun)

     

  

  

 

     

  

Jan 08 

Bills Receivable A/c

Dr. 

 

40,000 

  

  

 ---------To Varun A/c

     

40,000 

  

(Being Varun's acceptance received)

     

  

  

 

     

  

Mar 11 

Cash A/c

Dr. 

 

40,000 

  

  

 ---------To Bills Receivable A/c

     

40,000 

  

(Being bill met on due date)

   

  

  

  

Varun A/c

  

 

  

 

 

 

Book of Varun

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Purchases A/c

Dr. 

 

40,000 

  

  

---------To Darshan A/c

     

40,000 

  

(Being goods bought from Darshan)

     

  

  

 

     

  

Jan 08 

Darshan A/c

Dr. 

 

40,000 

  

  

  To Bills Payable A/c

     

40,000 

  

(Being bill of two months accepted for Darshan)

 

   

  

  

 

     

  

Mar 11 

Bills Payable A/c

Dr. 

 

40,000

 
 

 To Cash A/c

     

40,000

 

(Being Varun cleared his acceptance on the due date)

       

 

 

Case ii: When Darshan immediately discounted the bill @ 6% p.a. with his bank.

 

 

Book of Darshan

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Varun A/c

Dr. 

 

40,000 

  

  

 ---------To Sales A/c

     

40,000 

  

(Being goods sold to Varun)

     

  

  

 

     

  

Jan 08 

Bills Receivable A/c

Dr. 

 

40,000 

  

  

---------To Varun

     

40,000 

  

(Being B/R received from Varun for two months)

 

   

  

  

 

     

  

Jan08 

Bank A/c

Dr. 

 

39,600

 
 

Discount A/c

Dr.

 

400

 
 

---------To Bills Receivable A/c

     

40,000

 

(Being bill discounted with the bank @ 6 % p.a.)

       

 

 

 

Book of Varun

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Purchases A/c

Dr. 

 

40,000 

  

  

---------To Darshan A/c

     

40,000 

  

(Being goods bought from Darshan)

     

  

  

 

     

  

Jan 08 

Darshan A/c

Dr. 

 

40,000 

  

  

 ---------To Bills Payable A/c

     

40,000 

  

(Being bill of two month accepted for darshan)

 

   

  

  

 

     

  

 Mar 11 

Bills Payable A/c

Dr. 

 

40,000

 
 

---------To Bank A/c

     

40,000

 

(Being Varun cleared his acceptance on the due date)

       

 

 

Case iii: When the bill was endorsed immediately by Darshan in favour of his Cr. or Suresh.

 

Book of Darshan

Journal Entries

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Varun A/c

Dr. 

 

40,000 

  

 

 ---------To Sales A/c

     

40,000 

 

(Being goods sold to Varun)

     

  

 

 

     

  

Jan 08 

Bills Receivable A/c

Dr. 

 

40,000 

  

 

 ---------To Varun A/c

     

40,000 

 

(Being Varun's acceptance received for two months)

 

   

  

 

 

     

  

Jan 08 

Suresh A/c

Dr. 

 

40,000

 
 

---------To Bills Receivable A/c

     

40,000

 

(Being Varun's acceptance endorsed in favour of Suresh)

       

 

 

 

Book of Varun

Journal Entries 

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Purchases A/c

Dr. 

 

40,000 

  

  

 ---------To Darshan A/c

     

40,000 

  

(Being goods bought from Darshan)

     

  

  

 

     

  

Jan 08 

Darshan A/c

Dr. 

 

40,000 

  

  

 ---------To bills payable A/c

     

40,000 

  

(Being bill drawn by Darshan accepted for two months)

 

   

  

  

 

     

  

 Mar 11 

Bills Payable A/c

Dr. 

 

40,000

 
 

---------To Cash A/c

     

40,000

 

(Being bills paid to holder of bill)

       

 

 

Case iv: When three days before its maturity, the bill was sent by Darshan to his bank for collection.

 

Book of Darshan

Journal Entries 

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Varun A/c

Dr. 

 

40,000 

  

  

 ---------To Sale A/c

     

40,000 

  

(Being goods sold to Varun)

     

  

  

 

     

  

Jan 08 

Bills Receivable A/c

Dr. 

 

40,000 

  

  

 ---------To Varun A/c

     

40,000 

  

(Being Varun's acceptance received two months)

 

   

  

  

 

     

  

 Mar 08 

Bill sent for Collection A/c

Dr. 

 

40,000

 
 

---------To Bills Receivable A/c

     

40,000

 

(Being bills send for collection send to the bank)

       
           

Mar 11

Bank A/c

Dr.

 

40,000

 
 

---------To Bill sent for collection

     

40,000

 

(Being bill sent for collection realised)

       

 

 

 

Book of Varun

Journal Entries 

Date 

Particulars 

 

L.F. 

Dr. 

Rs. 

Cr. 

Rs. 

2016 

  

   

  

  

Jan 08 

Purchases A/c

Dr. 

 

40,000 

  

  

---------To Darshan A/c

     

40,000 

  

(Being goods bought from Darshan)

     

  

  

 

     

  

Jan 08 

Darshan A/c

Dr. 

 

40,000 

  

  

 ---------To Bills Payable A/c

     

40,000 

  

(Being bill drawn by Darshan accepted for two months)

 

   

  

  

 

     

  </