Bills of Exchange and Promissory NotesQ-3 | Bills of Exchange and Promissory NotesQuestion 5100 of 26
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R draws a bill of exchange on P for 2,00,000 on 1st July, 2022 for 4 months. P accepted the bill and sent it to R. R discounts the bill from his bankers for 1,88,000. R immediately remits 75,200 to P. On the due date, R, being unable to remit the amount due, accepts a bill for ₹ 2,50,000 for 4 months which is discounted by P for 2,36,250. P sends 56,700 to R. Before the bill is due for payment R becomes insolvent, his estate is paying fifty paise in the rupee. Give the journal entries in the books of P. Also show R's account in P's books. [Dec. 2023, 10 Marks]

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Detailed Solution & Explanation

### In the books of P ### Journal Entries | Date | Particulars | L.F. | Debit (₹) | Credit (₹) | | :--- | :--- | :---: | ---: | ---: | | **2022-23**
1 July | R A/c
    To Bills payable A/c
(Being bill of 4 months accepted and sent to Mr. R) | | 2,00,000 |
2,00,000 | | | Bank A/c
Discounting charges A/c
    To R A/c
(Being the amount received from R) | | 75,200
4,800 |

80,000 | | 4 Nov. | Bills receivable A/c
    To R A/c
(Being the bill accepted by R) | | 2,50,000 |
2,50,000 | | | Bank A/c
Discounting charges A/c
    To Bills receivable A/c
(Being bill discounted with the bank) | | 2,36,250
13,750 |

2,50,000 | | | Bills payable A/c
    To Bank A/c
(Being bills payable paid) | | 2,00,000 |
2,00,000 | | | R A/c
    To Bank A/c
    To Discounting charges
(Being amount remitted to R & along with his share of discounting charges) | | 66,984 |
56,700
10,284 | | 7 Mar | R A/c
    To Bank A/c
(Being R's acceptance dishonoured due to his insolvency) | | 2,50,000 |
2,50,000 | | | Bank A/c
Bad debts A/c
    To R A/c
(The amount received from R and the balance being written off as bad debts) | | 93,492
93,492 |

1,86,984 |
### Working Note: 1. Share of P in discounting charges of first bill = Amount RemittedDiscounted Amt of bill×100=75,2001,88,000×100=40%\displaystyle \frac{\text{Amount Remitted}}{\text{Discounted Amt of bill}} \times 100 = \frac{75,200}{1,88,000} \times 100 = 40\% 40% of 12,000=4,80040\% \text{ of } 12,000 = 4,800 2. Share of R in discounting charges of second bill = 13,750×1,20,000+56,7002,36,250=10,284\displaystyle 13,750 \times \frac{1,20,000 + 56,700}{2,36,250} = 10,284
### R's Account | Particulars | Amt | Particulars | Amt | | :--- | ---: | :--- | ---: | | To Bills Payable A/c | 2,00,000 | By Bank A/c | 75,200 | | To Bank A/c | 56,700 | By Discounting Charges A/c | 4,800 | | To Discounting charges | 10,284 | By Bills receivable A/c | 2,50,000 | | To Bank A/c | 2,50,000 | By Bank A/c | 93,492 | | | | By Bad debts A/c | 93,492 | | **TOTAL** | **5,16,984** | **TOTAL** | **5,16,984** |

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.

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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