Mr. A accepts two bills of exchange on June 1, 2024 for ₹ 1,50,000 and 60,000 drawn on him by Mr. B. The bill of exchange for ₹ 1,50,000 is for two...

Question

Mr. A accepts two bills of exchange on June 1, 2024 for ₹ 1,50,000 and 60,000 drawn on him by Mr. B. The bill of exchange for ₹ 1,50,000 is for two months while the bill of exchange for 60,000 is for three months. Mr. B got the first bill discounted with the bank for ₹ 1,49,000 on June 3, 2024. On August 2, 2024 Mr. A requested Mr. B. to cancel both the bills and drew a new bill on him with the combined amount of both the bills along with interest @ 12% per annum for a period of two months. Before the due date of the renewed bill on September 3, 2024, Mr. A becomes insolvent and only 40 paise in a rupee could be recovered from his estate. You are required to give the journal entries in the books of Mr. B. [Jan. 2025, 5 Marks]

Accepted Answer

Answer Solution: In the books of Mr. B Journal Entries Date Particulars Amount Amount 2024 1 June Bill Receivable 1 A/c Dr. Bill Receivable 2 A/ c Dr. To Mr. A A/c (Being two bills for 2 months & 3 months respectively drawn on him) 1,50,000 60,000 - - - 2,10,000 3 June Bank A/c Dr. Discounting charges A/c Dr. To Bills Receivable 1 A/c 1,49,000 1,000 - - - 1,50,000 (Being first bill discounted with the bank) 2 Aug Mr. A A/c Dr. To Bank A/c To Bill Receivable 2 A/c (Being first & second bill cancelled due to Mr. A's request) 2,10,000 - - - 1,50,000 60,000 2 Aug Mr. A A/c Dr. To Interest A/ c (Being interest charged on both the bills @ 12% p.a. for two months) 4,200 - - 4,200 2 Aug Bill Receivable 3 A/c Dr. To Mr. A A/c (Being new bill drawn or him including interest of two months) 2,14,200 - - 2,14,200 3 Sept Mr. A A/c Dr. To Bill Receivable 3 A/c (Being bill dishonoured due to insolvency of Mr. A.) 2,14,200 - - 2,14,200 3 Sept Bank A/c Dr. Bad Debts A/c Dr. To Mr. A /c (Being 40% in a rupee received from his estate) 85,680 1,28,520 - - - 2,14,200 UNIT – 1 & 2 (Final Accounts of Non – Manufacturing and Manufacturing Units) DESCRPTIVE QUESTION

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