Bills of Exchange and Promissory NotesQ-5 | Bills of Exchange and Promissory NotesQuestion 5102 of 26
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On 1st April, 2024, X sells goods to Y for 25,000 plus IGST @ 18% and draws two bills of exchange on him; the first bill for 15,000 for 2 months and second bill for the balance for 3 months. Y accepts and returns these bills to X. Both the bills are sent to the bank for collection on 1st April, 2024. In due course, X receives the information from the bank on the due date of the respective bill that the bill for 15,000 has been duly met and the other bill has been dishonored. Noting charges paid on the dishonour of second bill are 500. Pass the journal entries along with narrations in the books of X. [RTP Jan. 2025]

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Detailed Solution & Explanation

### Journal Entries | Date | Particulars | L.F. | Debit (₹) | Credit (₹) | | :--- | :--- | :---: | ---: | ---: | | Apr 1 | Y A/c
    To Sales A/c
    To Output IGST A/c
(Being the inter-state sale of goods to Y, charged to IGST @ 18%) | | 29,500 |
25,000
4,500 | | Apr 1 | Bills Receivable (No. 1) A/c
Bills Receivable (No. 2) A/c
    To Y
(Being the two bills acceptance one for 15,000 and the other for 14,500 received) | | 15,000
14,500 |

29,500 | | Apr 1 | Bills sent for collection A/c
    To Bills Receivable (No. l) A/c
    To Bills Receivable (No. 2) A/c
(Being the Bills sent to bank for collection) | | 29,500 |
15,000
14,500 | | July 4 | Bank A/c
    To Bills sent for collection A/c
(Being the amount duly collected by bank on first bill) | | 15,000 |
15,000 | | Aug 4 | Y A/c
    To Bills sent for collection A/c
    To Bank A/c
(Being the second bill dishonored and bank paid 500 as noting charges) | | 15,000 |
14,500
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.

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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