(When the Drawee is Declared Insolvent).P accepted a draft for Rs 40,000 drawn on him by Q on 1st May,2008,for 3 months.This was for the amount which P owed Q .Q got the bill discounted at his bank for Rs 39,000.Just before the due date,P approached Q for renewal of the bill.Q agreed on condition that Rs 10,000 should be paid immediately together with interest on the remaining amount @ 12% p.a. for 3 months and that for the remaining balance P should accept a new bill for 3 months.These arrangements were carried through.On 7th November,2008,P became insolvent and his estate paid 40%.Give the Journal entries in the books of P and Q.
In the Books of P (Drawee) Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
2008 |
|
|
|
| |
May 01 | Q | Dr. |
| 40,000 |
|
| To Bills Payable A/c |
|
| 40,000 | |
| (Bill accepted) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Bills Payable A/c | Dr. |
| 40,000 |
|
| To Q |
|
| 40,000 | |
| (Bill renewed) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Interest A/c | Dr. |
| 900 |
|
| To Q |
|
| 900 | |
| (Interest on Rs 30,000 at 12% for 3 months) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Q | Dr. |
| 10,900 |
|
| To Cash/Bank A/c |
|
| 10,900 | |
| (Amount paid to Q in cash) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Q | Dr. |
| 30,000 |
|
| To Bills Payable A/c |
|
| 30,000 | |
| (New bill accepted) |
|
|
| |
|
|
|
|
| |
Nov. 07 | Bills Payable A/c | Dr. |
| 30,000 |
|
| To Q |
|
| 30,000 | |
| (Bill dishonoured due to P’s insolvency) |
|
|
| |
|
|
|
|
| |
Nov. 07 | Q | Dr. |
| 30,000 |
|
| To Cash/Bank A/c |
|
| 12,000 | |
| To Profit and Loss A/c |
|
| 18,000 | |
| (Only 40% amount is settled from P) |
|
|
| |
In the Books of Q (Drawer) Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
2008 |
|
|
|
| |
May 01 | Bills Receivable A/c | Dr. |
| 40,000 |
|
| To P |
|
| 40,000 | |
| (Acceptance received from P) |
|
|
| |
|
|
|
|
| |
May 01 | Ban A/c | Dr. |
| 39,000 |
|
| Discounting Charges A/c | Dr. |
| 1,000 |
|
| To Bills Receivable A/c |
|
| 40,000 | |
| (Bill discounted with bank) |
|
|
| |
|
|
|
|
| |
Aug. 04 | P | Dr. |
| 40,000 |
|
| To Bank A/c |
|
| 40,000 | |
| (Entry for dishonour as the bill is renewed) |
|
|
| |
|
|
|
|
| |
Aug. 04 | P | Dr. |
| 900 |
|
| To Interest A/c |
|
| 900 | |
| (Interest due on Rs 30,000 at 12% for 3 months) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Cash/Bank A/c | Dr. |
| 10,900 |
|
| To P |
|
| 10,900 | |
| (Amount received in cash) |
|
|
| |
|
|
|
|
| |
Aug. 04 | Bills Receivable A/c | Dr. |
| 30,000 |
|
| To P |
|
| 30,000 | |
| (New bill received) |
|
|
| |
|
|
|
|
| |
Nov. 07 | P | Dr. |
| 30,000 |
|
| To Bills Receivable A/c |
|
| 30,000 | |
| (Dishonour of bill due to P’s insolvency) |
|
|
| |
|
|
|
|
| |
Nov. 07 | Cash/Bank A/c | Dr. |
| 12,000 |
|
| Bad Debts A/c | Dr. |
| 18,000 |
|
| To P |
|
| 30,000 | |
| (Only 40% amount is settled) |
|
|
| |
Working Notes: Calculation of Interest Due
