Nikhil sold goods for ₹23,000 to Akhil on Dec. 01, 2017. He drew upon Akhil a bill of exchange for the same am

Numerical Questions · Q20

Q. Nikhil sold goods for ₹23,000 to Akhil on Dec. 01, 2017. He drew upon Akhil a bill of exchange for the same amount payable after 2 months. Akhil accepted the bill and sent it back to Nikhil. Nikhil discounted the bill immediately with his bank @12 p.a. On the due date Akhil dishonoured the bill of exchange and the bank paid ₹100 as noting charges. Akhil requested Nikhil to draw a new bill upon him with interest @10% p.a. which he agreed. The new bill was payable after two months. A week before the maturity of the second bill Akhil requested Nikhil to cancel the second bill. He further requested to accept ₹10,000 in cash immediately and drew a third bill upon him including interest of ₹500. Nikhil agreed to Akhil's request. The third bill was payable after one month. Akhil met the third bill on its maturity. record the necessary journal entries in the books of Nikhil and Akhil and also prepare Akhil's account in the books of Nikhil and Nikhil's account in the books of Akhil.

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Bill 1: ₹23,000 for 2 months dated 01 Dec 2017 (maturity Feb 01 + 3 days grace = 04 Feb 2018), discounted at once @12% p.a.: discount = ₹23,000 × 12/100 × 2/12 = ₹460, bank pays ₹22,540. Dishonoured on maturity; bank pays ₹100 noting charges, so amount due from Akhil = ₹23,000 + ₹100 = ₹23,100. Renewal interest = ₹23,100 × 10/100 × 2/12 = ₹385, so Bill 2 = ₹23,485 (2 months, maturity 04 Apr 2018). A week before maturity (31 Mar 2018) Bill 2 is cancelled: Akhil pays ₹10,000 cash, ₹500 interest is added, so Bill 3 = ₹23,485 − ₹10,000 + ₹500 = ₹13,985 (1 month, maturity 03 May 2018), met on maturity. Each personal account totals ₹70,470.

Books of Nikhil

Date	Particulars	Debit (₹)	Credit (₹)
2017 Dec 01	Akhil's A/c Dr.	23,000
	To Sales A/c		23,000
	(Sold goods to Akhil on credit)
2017 Dec 01	Bills Receivable A/c Dr.	23,000
	To Akhil's A/c		23,000
	(Received Akhil's acceptance payable after 2 months)
2017 Dec 01	Bank A/c Dr.	22,540
	Discount A/c Dr.	460
	To Bills Receivable A/c		23,000
	(Bill discounted with bank @12% p.a. for 2 months)
2018 Feb 04	Akhil's A/c Dr.	23,100
	To Bank A/c		23,100
	(Discounted bill dishonoured by Akhil; bank paid ₹100 noting charges)
2018 Feb 04	Akhil's A/c Dr.	385
	To Interest A/c		385
	(Interest charged on renewal @10% p.a. for 2 months)
2018 Feb 04	Bills Receivable A/c Dr.	23,485
	To Akhil's A/c		23,485
	(Received second acceptance for amount due plus interest)
2018 Mar 31	Akhil's A/c Dr.	23,485
	To Bills Receivable A/c		23,485
	(Second bill cancelled a week before maturity on Akhil's request)
2018 Mar 31	Akhil's A/c Dr.	500
	To Interest A/c		500
	(Interest charged on second renewal)
2018 Mar 31	Cash A/c Dr.	10,000
	Bills Receivable A/c Dr.	13,985
	To Akhil's A/c		23,985
	(Received ₹10,000 cash and a third acceptance for the balance)
2018 May 03	Bank A/c Dr.	13,985
	To Bills Receivable A/c		13,985
	(Third bill met by Akhil on maturity)

Books of Akhil

Date	Particulars	Debit (₹)	Credit (₹)
2017 Dec 01	Purchases A/c Dr.	23,000
	To Nikhil's A/c		23,000
	(Purchased goods from Nikhil on credit)
2017 Dec 01	Nikhil's A/c Dr.	23,000
	To Bills Payable A/c		23,000
	(Accepted Nikhil's draft payable after 2 months)
2018 Feb 04	Bills Payable A/c Dr.	23,000
	Noting Charges A/c Dr.	100
	To Nikhil's A/c		23,100
	(Dishonoured acceptance in favour of Nikhil; noting charges ₹100)
2018 Feb 04	Interest A/c Dr.	385
	To Nikhil's A/c		385
	(Interest due to Nikhil on renewal)
2018 Feb 04	Nikhil's A/c Dr.	23,485
	To Bills Payable A/c		23,485
	(Accepted second bill for amount due plus interest)
2018 Mar 31	Bills Payable A/c Dr.	23,485
	To Nikhil's A/c		23,485
	(Second bill cancelled a week before maturity)
2018 Mar 31	Interest A/c Dr.	500
	To Nikhil's A/c		500
	(Interest due to Nikhil on second renewal)
2018 Mar 31	Nikhil's A/c Dr.	23,985
	To Cash A/c		10,000
	To Bills Payable A/c		13,985
	(Paid ₹10,000 cash and accepted a third bill for the balance)
2018 May 03	Bills Payable A/c Dr.	13,985
	To Bank A/c		13,985
	(Met the third acceptance on maturity)

Akhil's Account (in the books of Nikhil) …

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