Page 156 - ISCDEBK-XI

Bill of Exchange 17.21

Advanced Level Questions

Illustration 11.
D owes ` 30,000 to S. The debt is discharged by D on 1st June, 2021 by accepting two bills of
exchange drawn on him by S—One for ` 20,000 at 2 months and the other for ` 10,000 at 3 months.
The first bill is endorsed in favour of C, a creditor, in full settlement of his debt for ` 21,000. The
second bill is discounted with the bank at 12% p.a. on 4th June. Both the bills were dishonoured
on the due date, the noting charges in each case being ` 500. On 5th September, D agreed to accept
another bill for the total amount including interest @ 15% p.a. payable after 3 months. On the due
date the bill was dishonoured. D was declared insolvent and his estate paid 60 paise in the rupee of
8th December, 2021. Show Journal entries in respect of the above in the books of S and D.
Solution: JOURNAL OF S
Date Particulars L.F. Dr. (`) Cr. (`)
2021
June 1 Bills Receivable A/c (1) ...Dr. 20,000
Bills Receivable A/c (2) ...Dr. 10,000
To D 30,000
(Being two bills of ` 20,000 and ` 10,000 drawn on D for
2 and 3 months respectively)
June 1 C ...Dr. 21,000
To Bills Receivable (1) A/c 20,000
To Discount Received A/c 1,000
(Being the bill for ` 20,000 endorsed in favour of C in full
settlement of a debt of ` 21,000)
June 4 Bank A/c ...Dr. 9,700
Discounting Charges A/c (` 10,000 × 12/100 × 3/12) ...Dr. 300
To Bills Receivable (2) A/c 10,000
(Being the bill for ` 10,000 discounted @ 12% p.a.)
August 4 D ...Dr. 20,500
Discount Received A/c ...Dr. 1,000
To C 21,500
(Being the bill for ` 20,000 dishonoured at maturity—noting
charges ` 500 paid by C)
Sept. 4 D ...Dr. 10,500
To Bank A/c 10,500
(Being the bill for ` 10,000 dishonoured at maturity—noting
charges ` 500 paid)
Sept. 5 D ...Dr. 1,419
To Interest A/c (WN) 1,419
(Being the interest charged for the extended period)
Sept. 5 Bills Receivable (New) A/c ...Dr. 32,419
To D (` 20,500 + ` 10,500 + ` 1,419) 32,419
(Being a new bill drawn on D for the balance plus interest)
Dec. 8 D ...Dr. 32,419
To Bills Receivable (New) A/c 32,419
(Being the fresh bill dishonoured due to D’s insolvency)
Dec. 8 Bank A/c ...Dr. 19,451*
Bad Debts A/c ...Dr. 12,968*
To S 32,419
(Being the first and final dividend received @ 60 paise
in a rupee of the net amount due)