Q.On Jan 01, 2016, Shankar purchased goods from Parvati for ₹8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Recore the necessary Journal entries in the books of Parvati and Shankar.
Note ₹8,000 for 3 months: normal maturity = Jan 01 + 3 months = Apr 01, plus 3 days of grace = 04 Apr 2016. An emergency holiday declared under the Negotiable Instruments Act 1881 on the due date pushes the maturity to the NEXT working day = 05 Apr 2016 (contrast the public-holiday rule, which moves it to the preceding day). No discount or interest arises. Payment is collected by the lawyer and passed to Parvati on 05 Apr 2016.
Books of Parvati
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Jan 01 | Shankar's A/c Dr. | 8,000 | ||
| To Sales A/c | 8,000 | |||
| (Sold goods to Shankar on credit) | ||||
| 2016 Jan 01 | Bills Receivable A/c Dr. | 8,000 | ||
| To Shankar's A/c | 8,000 | |||
| (Received Shankar's promissory note payable after 3 months) | ||||
| 2016 Apr 05 | Bank A/c Dr. | 8,000 | ||
| To Bills Receivable A/c | 8,000 | |||
| (Note met on the next working day after the emergency holiday, collected through lawyer) |
Books of Shankar
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Jan 01 | Purchases A/c Dr. | 8,000 | ||
| To Parvati's A/c | 8,000 | |||
| (Purchased goods from Parvati on credit) | ||||
| 2016 Jan 01 | Parvati's A/c Dr. | 8,000 | ||
| To Bills Payable A/c | 8,000 | |||
| (Issued promissory note in favour of Parvati for 3 months) | ||||
| 2016 Apr 05 | Bills Payable A/c Dr. | 8,000 | ||
| To Bank A/c | 8,000 | |||
| (Note met on maturity, i.e. the next working day after the emergency holiday) |
Maturity date 05 Apr 2016 — because an emergency holiday declared under the Negotiable Instruments Act 1881 fell on the due date (04 Apr 2016), the note becomes due on the next working day. Parvati records receipt of ₹8,000 and Shankar records payment of ₹8,000 on 05 Apr 2016.
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