Preparation of Final Accounts of Sole ProprietorsQ-6 | Final Accounts of Sole ProprietorsQuestion 5103 of 40
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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]

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Detailed Solution & Explanation

### In the books of Mr. B ### Journal Entries | Date | Particulars | L.F. | Debit (₹) | Credit (₹) | | :--- | :--- | :---: | ---: | ---: | | **2024**
1 June | Bill Receivable 1 A/c
Bill Receivable 2 A/c
    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
Discounting charges A/c
    To Bills Receivable 1 A/c
(Being first bill discounted with the bank) | | 1,49,000
1,000 |

1,50,000 | | 2 Aug | Mr. A A/c
    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
    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
    To Mr. A A/c
(Being new bill drawn on him including interest of two months) | | 2,14,200 |
2,14,200 | | 3 Sept | Mr. A A/c
    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
Bad Debts A/c
    To Mr. A A/c
(Being 40% in a rupee received from his estate) | | 85,680
1,28,520 |

2,14,200 |

About This Chapter: Final Accounts

Paper

Paper 1: Accounting

Weightage

25-30%

Key Topics

Sole Proprietor, NPO, Manufacturing

This chapter covers Sole Proprietor, NPO, Manufacturing and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 25-30% weightage. Focus on understanding core concepts rather than memorizing.

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More Questions from Preparation of Final Accounts of Sole Proprietors

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]

Discuss the limitations which must be kept in mind while evaluating the Financial Statements. [Nov. 2018, 4 Marks]

Trading account

Profit and loss account

Balance sheet

Manufacturing A/c

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