Q.Narayanan purchased goods for ₹25,000 from Ravinderan on Feb. 01, 2016. Ravinderan drew upon Narayanan a bill of exchange for the same amount payable after 30 days. On the due date Narayanan dishonoured his acceptance. Record the necessary journal entries in the books of Ravinderan and Narayanan in following cases:
- When the bill was retained by Ravinderan with him till the date of its maturity.
- When the bill was discounted by Ravinderan immediately with his bank @ 6% p.a.
- When the bill was endorsed to his creditor Ganeshan.
- When the bill was sent by Ravinderan to his bank for collection a few days before it maturity.
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Start your 14-day free trial to unlock the full solution →Bill ₹25,000 for 30 days, dated 1 Feb 2016 (leap year). Maturity = 1 Feb + 30 days = 2 Mar, plus 3 days of grace = 5 Mar 2016. Discounting (case ii) @6% for ~1 month = ₹25,000 × 6% × 1/12 = ₹125, so the bank pays ₹24,875. The bill is dishonoured in every case: Ravinderan reinstates Narayanan's liability by debiting Narayanan and crediting whoever held the bill; Narayanan's own entries are identical in all four cases.
Books of Ravinderan — (i) Bill retained till maturity
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Feb 01 | Narayanan's A/c Dr. | 25,000 | ||
| To Sales A/c | 25,000 | |||
| (Sold goods to Narayanan on credit) | ||||
| 2016 Feb 01 | Bills Receivable A/c Dr. | 25,000 | ||
| To Narayanan's A/c | 25,000 | |||
| (Received Narayanan's acceptance for 30 days) | ||||
| 2016 Mar 05 | Narayanan's A/c Dr. | 25,000 | ||
| To Bills Receivable A/c | 25,000 | |||
| (Narayanan dishonoured his acceptance on maturity) |
Books of Ravinderan — (ii) Bill discounted @6% p.a.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Feb 01 | Narayanan's A/c Dr. | 25,000 | ||
| To Sales A/c | 25,000 | |||
| (Sold goods to Narayanan on credit) | ||||
| 2016 Feb 01 | Bills Receivable A/c Dr. | 25,000 | ||
| To Narayanan's A/c | 25,000 | |||
| (Received Narayanan's acceptance for 30 days) | ||||
| 2016 Feb 01 | Bank A/c Dr. | 24,875 | ||
| Discount A/c Dr. | 125 | |||
| To Bills Receivable A/c | 25,000 | |||
| (Bill discounted @6%; ₹25,000×6%×1/12 = ₹125) | ||||
| 2016 Mar 05 | Narayanan's A/c Dr. | 25,000 | ||
| To Bank A/c | 25,000 | |||
| (Discounted bill dishonoured; amount paid to the bank) |
Books of Ravinderan — (iii) Bill endorsed to creditor Ganeshan
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Feb 01 | Narayanan's A/c Dr. | 25,000 | ||
| To Sales A/c | 25,000 | |||
| (Sold goods to Narayanan on credit) | ||||
| 2016 Feb 01 | Bills Receivable A/c Dr. | 25,000 | ||
| To Narayanan's A/c | 25,000 | |||
| (Received Narayanan's acceptance for 30 days) | ||||
| 2016 Feb 01 | Ganeshan's A/c Dr. | 25,000 | ||
| To Bills Receivable A/c | 25,000 | |||
| (Bill endorsed in favour of creditor Ganeshan) | ||||
| 2016 Mar 05 | Narayanan's A/c Dr. | 25,000 | ||
| To Ganeshan's A/c | 25,000 | |||
| (Endorsed bill dishonoured on maturity) |
Books of Ravinderan — (iv) Bill sent for collection a few days before maturity
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2016 Feb 01 | Narayanan's A/c Dr. | 25,000 | ||
| To Sales A/c | 25,000 | |||
| (Sold goods to Narayanan on credit) | ||||
| 2016 Feb 01 | Bills Receivable A/c Dr. | 25,000 | ||
| To Narayanan's A/c | 25,000 |
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