Page 140 - ISCDEBK-XI

Bill of Exchange 17.5

Solved Questions

Illustration 1.
On 1st January, 2021, A received ` 25,000 in cash and two bills for ` 45,000 and ` 30,000 for
2 months each from B, duly accepted by the latter, against sale proceeds. The first bill was
endorsed to C in settlement of his account ` 45,500 and the second bill discounted from bank
@ 12% p.a. on the date of acceptance of bills. Both the bills were dishonoured on due date.
C has paid ` 100 and the bank has paid ` 80 as noting charges. B paid ` 20,000 and noting
charges in cash and accepted a new bill for balance at 3 months. The interest on balance @ 18%
p.a. was paid in cash.

On due date of the new bill, B became insolvent and no amount was recovered from his estate.
Pass Journal entries in the books of the Drawer and Drawee.

Solution: In the Books of A (Drawer)
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2021
Jan. 1 B ...Dr. 1,00,000
To Sales A/c 1,00,000
(Being the goods sold to B)
Jan. 1 Cash A/c ...Dr. 25,000
Bills Receivable (I) A/c ...Dr. 45,000
Bills Receivable (II) A/c ...Dr. 30,000
To B 1,00,000
(Being the cash and acceptance for bills received)

Jan. 1 C ...Dr. 45,500
To Bills Receivable (I) A/c 45,000
To Discount Received A/c 500
(Being the bills receivable (I) endorsed to C in full settlement)
Jan. 1 Bank A/c ...Dr. 29,400
Discounting Charges A/c (` 30,000 × 12/100 × 2/12) ...Dr. 600
To Bills Receivable (II) A/c 30,000
(Being the bills receivable (II) discounted @ 12% p.a.)

March 4 B ...Dr. 45,100
Discount Received A/c ...Dr. 500
To C 45,600
(Being the bill for ` 45,000 dishonoured at maturity and
` 100 paid as noting charges)

March 4 B ...Dr. 30,080
To Bank A/c 30,080
(Being the amount of dishonoured bill and noting charges ` 80
debited to the drawee)
March 4 Cash A/c (` 20,000 + ` 100 + ` 80) ...Dr. 20,180
To B 20,180
(Being the cash received from B)