Bills of Exchange and Promissory NotesQ-2 | Bills of Exchange and Promissory NotesQuestion 5099 of 26
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Journalise the following transactions in the books of Karthik: (i) Karthik accepted a bill to Balu for 3,500 discharged by a cash payment of 1,500 and a new bill for the balance plus 75 for interest. (ii) Gopal acceptance for 4,500 which was endorsed by Karthik to Mohan was dishonoured. Mohan paid 50 as noting charges. Bill was withdrawn against cheque. (iii) Doshi retires a bill for ₹ 2,500 drawn on him by Karthik for ₹ 25 discount. (iv) Karthik's acceptance to Prem for ₹ 6,500 discharged by Prem. Ashok's acceptance to Karthik for a similar amount. [June 2023, 5 Marks]

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Detailed Solution & Explanation

### In the books of Karthik ### Journal Entries | Date / No. | Particulars | L.F. | Debit (₹) | Credit (₹) | | :--- | :--- | :---: | ---: | ---: | | (i) | Bills Payable A/c
    To Balu A/c
(Being old bills payable dishonoured) | | 3,500 |
3,500 | | | Balu A/c
    To Cash A/c
(Being part payment made) | | 1,500 |
1,500 | | | Interest A/c
    To Balu A/c
(Being interest due to him) | | 75 |
75 | | | Balu A/c
    To Bills Payable A/c
(Being new bill accepted to him) | | 2,075 |
2,075 | | (ii) | Gopal A/c
    To Mohan A/c
(Being Gopal's acceptance endorsed to Mohan earlier, now dishonoured) | | 4,550 |
4,550 | | | Mohan A/c
    To Bank A/c
(Being payment made to Mohan) | | 4,550 |
4,550 | | (iii) | Cash A/c
Discount A/c
    To B/R A/c
(Being payment received from Doshi, allowed him discount) | | 2,475
25 |

2,500 | | (iv) | Bills Payable A/c
    To Bills Receivable A/c
(Being bills payable from Ashok endorsed to Prem, in settlement of bills payable issued to him earlier) | | 6,500 |
6,500 |

About This Chapter: Special Transactions

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Bills of Exchange, Consignment, Average Due Date

This chapter covers Bills of Exchange, Consignment, Average Due Date and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Promissory Note

An instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money.

Acceptance

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Acceptance must be absolute and unqualified (Section 7, ICA 1872). A conditional acceptance is a counter-offer.

Related Comparison Tables

Promissory Note vs Bill of Exchange: Negotiable Instruments

More Questions from Bills of Exchange and Promissory Notes

A firm purchased a second-hand machinery on April 1, 2021 for 15,00,000 subsequent to which ₹ 2,00,000 were spent on its repairs and installation. On October 1, 2021 another machinery was purchased for 9,00,000 and cost of installing the machine in a new plant is ₹ 20,000. The firm also shifted the machinery purchased on April 1, 2021 to the new plant and incurred freight of 10,000. They adopted a policy of charging depreciation @ 12% per annum on diminishing balance method. On April 1, 2023 it was decided to change the method and rate of depreciation to straight line basis. On this date, the remaining useful life was assessed as 5 years for both the machines purchased with no scrap value. On October 1, 2023 the first machine become outdated and sold for 2,50,000. On the same date, another machinery was purchased for * 8,50,000. The estimated useful life of the machine is 10 years and residual value is ₹ 30,000. You are required to prepare the machinery account for the year ending March 31, 2024. [Jan. 2025, 10 Marks]

Bill of exchange and the various parties to it. [MTP Jan. 2025]

Meaning of Promissory Note

Retirement of bill [RTP Jan. 2025]; [MTP Jan. 2025]

Bill of Exchange and Promissory Note

A promissory note can be made payable to the bearer. [Sep. 2024, 2 Marks]

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