Lilly sold goods to Methew on 1.3.2017 for ₹12,000 and drew upon Methew a bill of exchange for the same amount

Numerical Questions · Q17

Q. Lilly sold goods to Methew on 1.3.2017 for ₹12,000 and drew upon Methew a bill of exchange for the same amount payable after two months. Lilly immediately discounted the bill with her bank at 9% p.a. The maturity date of the bill was a non business day (holiday), therefore, Lilly had to present the bill as per the provisions of the Indian Instruments Act, 1881. The bill was dishonoured by Methew and Lilly paid ₹45 as noting charges. Methew settled the claim of Lilly five days after the dishonour of the bill by a cheque, which includes interest @ 12% for the term of the bill. Journalise the above transactions in the books of Lilly and Methew and prepare Mathew's account in the books of Lilly and Lilly's account in the books of Mathew.

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Bill ₹12,000 for 2 months, dated Mar 01, 2017 ⇒ nominal maturity May 04, 2017 (May 01 + 3 days of grace); as May 04 is a holiday (non-business day, known in advance) the bill is presented on the preceding business day, May 03, 2017. Discount on discounting = ₹12,000 × 9% × 2/12 = ₹180 (Bank pays ₹11,820). On dishonour noting = ₹45 ⇒ Lilly's claim ₹12,000 + ₹45 = ₹12,045. Interest @ 12% for the term (2 months) = ₹12,000 × 12% × 2/12 = ₹240. Settlement five days later (May 08) by cheque = ₹12,045 + ₹240 = ₹12,285.

In the Books of Lilly — Journal

Date	Particulars	Debit (₹)	Credit (₹)
2017 Mar. 01	Methew's A/c Dr.	12,000
	To Sales A/c		12,000
2017 Mar. 01	Bills Receivable A/c Dr.	12,000
	To Methew's A/c		12,000
2017 Mar. 01	Bank A/c Dr.	11,820
	Discount A/c Dr.	180
	To Bills Receivable A/c		12,000
2017 May 03	Methew's A/c Dr.	12,045
	To Bank A/c		12,045
2017 May 08	Methew's A/c Dr.	240
	To Interest A/c		240
2017 May 08	Bank A/c Dr.	12,285
	To Methew's A/c		12,285

In the Books of Methew — Journal

Date	Particulars	Debit (₹)	Credit (₹)
2017 Mar. 01	Purchases A/c Dr.	12,000
	To Lilly's A/c		12,000
2017 Mar. 01	Lilly's A/c Dr.	12,000
	To Bills Payable A/c		12,000
2017 May 03	Bills Payable A/c Dr.	12,000
	Noting Charges A/c Dr.	45
	To Lilly's A/c		12,045
2017 May 08	Interest A/c Dr.	240
	To Lilly's A/c		240
2017 May 08	Lilly's A/c Dr.	12,285
	To Bank A/c		12,285

Methew's Account (in the Books of Lilly)

Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2017 Mar. 01	To Sales A/c		12,000	2017 Mar. 01	By Bills Receivable A/c		12,000
2017 May 03	To Bank A/c (dishonour)		12,045	2017 May 08	By Bank A/c		12,285

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