Lilly sold goods to Mathew on 1.3.2002 for Rs.12000 and drew upon Mathew a bill of exchange for the same amount payable after two months.Lilly immediately discounted the bill with her bank at 9&p.a. The maturity date of the bill was a non business day (holiday) therefore Lilly had to present the bill as per the provisions of the Indian Negotiable Instruments Act 1881. The bill was dishonoured by Mathew and Lilly paid Rs.45 asnoting charges. Mathew settled the claim of Lilly five days after the dishonour of the bill by a cheque, which includes interest @ 12% for the term of the bill.

Journalise the above transactions in the books of Lilly and Mathew and prepare Mathews account in the books of Lilly and Lillys account in the books of Mathew.

Books of Lily

Journal

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

2002

Mar.01

 

 

 

Mar.01

 

 

 

Mar. 01

 

 

 

 

May 03

 

 

 

May 03

 

 

 

May.03

 

 

 

May.08

 

Mathew

To Sales A/c

(Goods sold to Mathew)

 

Bills Receivable A/c

To Mathew

(Two months acceptance received from Mathew)

 

Bank A/c

Discount A/c

To Bills Receivable A/c

(Mathew’s bill discounted with Bank)

 

Mathew

To Bank A/c

(Mathew’s acceptance dishonoured)

 

Bank A/c

To Cash A/c

(Noting Charges paid on account of

dishonour of Mathew’s acceptance)

 

Mathew

To Interest A/c

(Interest credited to Mathew’s on account

of bill dishonoured)

 

Bank A/c

To Mathew

(Amount received from Mathew)

 

 

Dr.

 

 

 

 

Dr.

 

 

Dr.

Dr.

 

 

 

Dr.

 

 

 

Dr.

 

 

 

Dr.

 

 

 

Dr.

 

 

 

12,000

 

 

 

 

12,000

 

 

11,820

180

 

 

 

12,045

 

 

 

45

 

 

 

1,440

 

 

 

13,485

 

 

12,000

 

 

 

 

12,000

 

 

 

12,000

 

 

 

12,045

 

 

 

45

 

 

 

1,440

 

 

 

13,485

 

      

 

Ledger

Mathew’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

Mar.01

Sales

 

12,000

Mar.01

Bills Receivable

 

12,000

May.03

Bank

 

12,045

May.08

Bank

 

13,485

May.03

Interest

 

1,440

 

 

 

 

 

 

 

25,485

 

 

 

25,485

 

 

 

 

 

 

 

 

 

Books of Mathew

Journal

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

2002

Mar.01

 

 

 

Mar.01

 

 

 

May 03

 

 

 

 

May 03

 

 

 

May 08

 

Purchases A/c

To Lily

(Goods bought from Lily)

 

Lily

To Bills Payable A/c

(Bill drawn by Lily payable after

two months accepted)

 

Bills Payable A/c

Noting Charges A/c

To Lily

(Bill drawn by Lily dishonoured)

 

Interest A/c

To Lily

(Interest due to Lily for dishnour of bill)

 

Lily

To Bank A/c

(Lily’s due cleared by paying

through cheque)

 

 

Dr.

 

 

 

Dr.

 

 

 

Dr.

Dr.

 

 

 

Dr.

 

 

 

Dr.

 

 

 

12,000

 

 

 

12,000

 

 

 

12,000

45

 

 

 

1,440

 

 

 

13,485

 

 

12,000

 

 

 

12,000

 

 

 

 

12,045

 

 

 

1,440

 

 

 

13,485

      

 

Ledger

Lily’s Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2002

Mar.01

May.08

 

Bills Payable

Bank

 

12,000

13,485

2002

Mar.01

May.03

May.03

May.03

 

Purchases

Bills Payable

Noting Charges

Interest

 

 

12,000

12,000

45

1,440

 

 

 

25,485

 

 

 

25,485

 

 

 

 

 

 

 

 

 

Note: In the solution, it has been assumed that the holiday is an official holiday. If this holiday would have been an emergency holiday, then the date of dishonour of the bill and date of settlement of the due would have been taken as May 05, 2002 and May 10, 2002 instead of May 03, 2005 and May 08, 2002.

 

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