A owes B rs.400 . A accepted bill of exchange at three months for this amount which B discounted for rs.380 .Give necessary journal entries in the books of A and B if this bill is:
(i) dishounoured on the due date ;(ii) met on maturity; and(iii) retired under rebate at 60% per annum, two months before its maturity.
Case (a) If the bill is dishonoured
Books of B | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| Bills Receivable A/c | Dr. |
| 400 |
|
| To A |
|
| 400 | |
| (A’s acceptance was received) |
|
|
| |
|
|
|
|
| |
| Bank A/c | Dr. |
| 380 |
|
| Discount Charges A/c | Dr. |
| 20 |
|
| To Bills Receivable A/c |
|
| 400 | |
| (A’s acceptance was discounted with bank) |
|
|
| |
|
|
|
|
| |
| A | Dr. |
| 400 |
|
| To Bank A/c |
|
| 400 | |
| (A’s acceptance dishonoured) |
|
|
| |
|
|
|
|
| |
Books of A | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| B | Dr. |
| 400 |
|
| To Bills Payable A/c |
|
| 400 | |
| (Bill drawn by B was accepted) |
|
|
| |
|
|
|
|
| |
| Bills Payable A/c | Dr. |
| 400 |
|
| To B |
|
| 400 | |
| (Bill drawn by B was dishonoured on maturity) |
|
|
| |
|
|
|
|
| |
Case (b) The bills met at maturity
Books of B | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| Bills Receivable A/c | Dr. |
| 400 |
|
| To A |
|
| 400 | |
| (A’s acceptance was received) |
|
|
| |
|
|
|
|
| |
| Bank A/c | Dr |
| 380 |
|
| Discount Charges A/c | Dr. |
| 20 |
|
| To Bills Receivable A/c |
|
| 400 | |
| (A’s acceptance was discounted with bank) |
|
|
| |
|
|
|
|
| |
Books of A | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| B | Dr. |
| 400 |
|
| To Bills Payable A/c |
|
| 400 | |
| (Bills drawn by B was accepted) |
|
|
| |
|
|
|
|
| |
| Bill Payable A/c | Dr. |
| 400 |
|
| To Cash A/c |
|
| 400 | |
| (Payment made meeting the bill on maturity) |
|
|
| |
|
|
|
|
| |
Case (c) If bill is retired under rebate at 6% p.a. 2 months before its maturity
Books of B | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| Bills Receivable A/c | Dr. |
| 400 |
|
| To A |
|
| 400 | |
| (A’s acceptance was received) |
|
|
| |
|
|
|
|
| |
| Cash A/c | Dr. |
| 396 |
|
| Rebate A/c | Dr. |
| 4 |
|
| To Bills Receivable A/c |
|
| 400 | |
| (Payment received 2 months before its maturity and gave rebate) |
|
|
| |
|
|
|
|
| |
Working Note:
Books of A | |||||
Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
| B | Dr. |
| 400 |
|
| To Bills Payable A/c |
|
| 400 | |
| (Bill drawn by B was accepted) |
|
|
| |
|
|
|
|
| |
| Bills Payable A/c | Dr. |
| 400 |
|
| To Cash A/c |
|
| 396 | |
| To Rebate A/c |
|
| 4 | |
| (Bill discharge before 2 months of its due date and rebate was received) |
|
|
| |
|
|
|
|
| |
Note:
1. In this question as A owed B, A is creditor and B is debtor.
2. In Case (c), rebate should be 6% p.a. and not 60% p.a. Also, the question says that the bill is already discounted with the bank. It means that the payment on the bill is already received and now the bank is the holder of the bill. Here, it is not possible to retire the bill on rebate (which happens only when the bill is held till maturity). Therefore, it has been assumed that the bill has not been discounted from bank (and therefore discounting entry is not passed) and it is retired at rebate @ 6% p.a. for 2 months