Ravi sold goods for ₹40,000 to Sudershan on Feb 13, 2016. He drew four bills of exchange upon Sudershan. The f

Numerical Questions · Q10

Q. Ravi sold goods for ₹40,000 to Sudershan on Feb 13, 2016. He drew four bills of exchange upon Sudershan. The first bill was for ₹5,000 payable after one month. The second bill was for ₹10,000 payable after 40 days; the third bill was for ₹12,000 payable after three months and fourth bill was for the balance amount payable after 19 days. Sudershan accepted all the bills and returned the same to Ravi. Ravi discounted the first bill with his bank at 6% p.a. He endorsed the second bill to his creditor Mustaq for the full settlement of a debt of ₹10,200. The third bill was kept by Ravi with him till the date of maturity. Five days before the maturity of the fourth bill, Ravi sent the bill to his bank for collection. All the four bills were dishounoured by Sudarshan on maturity. Sudershan settled Ravi's claim in cash three days after the dishonour of each bill along with interest @ 12% p.a. for the terms of the bills. You are requested to record the necessary journal entries in the books to Ravi, Sudershan, Mustaq and bank for the above transaction. Also prepare Sudershan's account and Mustaq's account in the books of Ravi.

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Fourth (balance) bill = ₹40,000 − 5,000 − 10,000 − 12,000 = ₹13,000. Maturities from 13 Feb 2016 (leap year): B1 (1 month) → 16 Mar, B4 (19 days) → 6 Mar, B2 (40 days) → 27 Mar, B3 (3 months) → 16 May. Discount on B1 @6% = ₹5,000×6%×1/12 = ₹25 (Bank ₹4,975). B2 endorsed to Mustaq settles a ₹10,200 debt → ₹200 discount received. All four dishonoured; settled in cash 3 days after each dishonour with interest @12% for each bill's own term: B1 ₹5,000×12%×1/12 = ₹50; B2 ₹10,000×12%×40/365 = ₹131.51 ≈ ₹132; B3 ₹12,000×12%×3/12 = ₹360; B4 ₹13,000×12%×19/365 = ₹81.20 ≈ ₹81 (total interest ₹623). Cash received ₹5,050 + 10,132 + 12,360 + 13,081 = ₹40,623. Sudershan's A/c totals ₹80,623; Mustaq's A/c totals ₹20,200 leaving ₹10,000 still owed to Mustaq.

Books of Ravi

Date	Particulars	Debit (₹)	Credit (₹)
2016 Feb 13	Sudershan's A/c Dr.	40,000
	To Sales A/c		40,000
	(Sold goods to Sudershan on credit)
2016 Feb 13	Bills Receivable A/c Dr.	40,000
	To Sudershan's A/c		40,000
	(Four acceptances received: ₹5,000, ₹10,000, ₹12,000 and ₹13,000)
2016 Feb 13	Bank A/c Dr.	4,975
	Discount A/c Dr.	25
	To Bills Receivable A/c		5,000
	(First bill discounted @6%; ₹5,000×6%×1/12 = ₹25)
2016 Feb 13	Mustaq's A/c Dr.	10,200
	To Bills Receivable A/c		10,000
	To Discount Received A/c		200
	(Second bill endorsed to Mustaq, debt ₹10,200 fully settled)
2016 Mar 01	Bills Sent for Collection A/c Dr.	13,000
	To Bills Receivable A/c		13,000
	(Fourth bill sent for collection, 5 days before maturity)
2016 Mar 06	Sudershan's A/c Dr.	13,000
	To Bills Sent for Collection A/c		13,000
	(Fourth bill dishonoured on maturity)
2016 Mar 09	Sudershan's A/c Dr.	81
	To Interest A/c		81
	(Interest on ₹13,000 @12% for 19 days = ₹81)
2016 Mar 09	Cash A/c Dr.	13,081
	To Sudershan's A/c		13,081
	(Fourth bill settled in cash with interest)
2016 Mar 16	Sudershan's A/c Dr.	5,000
	To Bank A/c		5,000
	(First (discounted) bill dishonoured; amount paid to bank)
2016 Mar 19	Sudershan's A/c Dr.	50
	To Interest A/c		50
	(Interest on ₹5,000 @12% for 1 month = ₹50)
2016 Mar 19	Cash A/c Dr.	5,050
	To Sudershan's A/c		5,050
	(First bill settled in cash with interest)
2016 Mar 27	Sudershan's A/c Dr.	10,000
	To Mustaq's A/c		10,000
	(Second (endorsed) bill dishonoured; liability to Mustaq restored)
2016 Mar 30	Sudershan's A/c Dr.	132
	To Interest A/c		132
	(Interest on ₹10,000 @12% for 40 days = ₹132)
2016 Mar 30	Cash A/c Dr.	10,132
	To Sudershan's A/c		10,132
	(Second bill settled in cash with interest)
2016 May 16	Sudershan's A/c Dr.	12,000
	To Bills Receivable A/c		12,000
	(Third (retained) bill dishonoured on maturity)
2016 May 19	Sudershan's A/c Dr.	360
	To Interest A/c		360
	(Interest on ₹12,000 @12% for 3 months = ₹360)
2016 May 19	Cash A/c Dr.	12,360
	To Sudershan's A/c		12,360
	(Third bill settled in cash with interest)

Books of Sudershan

Date	Particulars	Debit (₹)	Credit (₹)
2016 Feb 13	Purchases A/c Dr.	40,000
	To Ravi's A/c		40,000
	(Purchased goods from Ravi on credit)
2016 Feb 13	Ravi's A/c Dr.	40,000
	To Bills Payable A/c		40,000
	(Accepted four bills totalling ₹40,000)
2016 Mar 06	Bills Payable A/c Dr.	13,000
	To Ravi's A/c		13,000
	(Fourth acceptance dishonoured)
2016 Mar 09	Interest A/c Dr.	81
	To Ravi's A/c		81
2016 Mar 09	Ravi's A/c Dr.	13,081
	To Cash A/c		13,081
	(Fourth bill settled in cash with interest)
2016 Mar 16	Bills Payable A/c Dr.	5,000
	To Ravi's A/c		5,000
	(First acceptance dishonoured)
2016 Mar 19	Interest A/c Dr.	50
	To Ravi's A/c		50
2016 Mar 19	Ravi's A/c Dr.	5,050
	To Cash A/c		5,050
2016 Mar 27	Bills Payable A/c Dr.	10,000
	To Ravi's A/c		10,000
	(Second acceptance dishonoured)
2016 Mar 30	Interest A/c Dr.	132
	To Ravi's A/c		132
2016 Mar 30	Ravi's A/c Dr.	10,132
	To Cash A/c		10,132
2016 May 16	Bills Payable A/c Dr.	12,000
	To Ravi's A/c		12,000
	(Third acceptance dishonoured)
2016 May 19	Interest A/c Dr.	360
	To Ravi's A/c		360
2016 May 19	Ravi's A/c Dr.	12,360
	To Cash A/c		12,360

Books of Mustaq

Date	Particulars	Debit (₹)	Credit (₹)
2016 Feb 13	Bills Receivable A/c Dr.	10,000
	Discount Allowed A/c Dr.	200
	To Ravi's A/c		10,200
	(Received Ravi's endorsement in full settlement of ₹10,200)
2016 Mar 27	Ravi's A/c Dr.	10,000
	To Bills Receivable A/c		10,000

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