NCERT Solutions for Class 11 Commerce Accountancy Chapter 1 Introduction To Accounting are provided here with simple step-by-step explanations. These solutions for Introduction To Accounting are extremely popular among Class 11 Commerce students for Accountancy Introduction To Accounting Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the NCERT Book of Class 11 Commerce Accountancy Chapter 1 are provided here for you for free. You will also love the ad-free experience on Meritnationâ€™s NCERT Solutions. All NCERT Solutions for class Class 11 Commerce Accountancy are prepared by experts and are 100% accurate.

#### Question 1:

Name any two types of commonly used negotiable instruments.

The two types of commonly used negotiable instruments are:

1. Cheques

2. Bills of exchange

#### Question 2:

Write two points of distinction between bills of exchange and promissory note.

 Basis of Difference Bills of Exchange Promissory Note Drawer It is drawn by a creditor. It is drawn by a debtor. Parties There are three parties involved, namely drawer, drawee and payee. There are two parties involved, namely maker and payee.

#### Question 3:

State any four essential features of bill of exchange.

The four essential features of bills of exchange are:

1. It must be a written document.

2. It is an unconditional order to pay by the drawer to the drawee.

3. The maker of bill must sign it, without which it will not be a legal proof.

4. The amount to be paid along with its expiry date must be specifically mentioned (both in figures and words) in a bill of exchange.

#### Question 4:

State the three parties involved in a bill of exchange.

The following three parties are involved in a bill of exchange.

1. Drawer who makes the bill

2. Drawee who accepts the bill

3. Payee who receives the payment

#### Question 5:

What is meant by maturity of a bill of exchange?

Maturity of a bill means a date on which the bill is due for payment. Maturity date of the bill differs on the basis of the terms and conditions of the bill. There are three types of bill, viz. after date bill, after sight bill and at sight bill.

1. After date bill: In case of after date bill, the payment of the bill is made on the maturity date of the bill. The maturity date of the bill is ascertained by adding three days of grace period with the specified period of the bill (which starts from the date of drawing). For example, if a bill is drawn on 1st March, 2011 and payable after one month; its maturity date is 4th April. If the maturity date happens to be a gazetted holiday, then the bill is due for payment one day before. However, if the maturity date happens to be a casual holiday, then the bill is due for payment after one day.

2. After sight bill: In case of after sight bill, the payment of the bill is made on the maturity date of the bill. The maturity date of the bill is ascertained by adding three days of grace period with the specified period of the bill (which starts from the date of acceptance by the drawee). For example, if a one month bill is drawn on 1st March, 2011 and is accepted by the drawee on 5th March, 2011; its maturity date is 8th April. In this case, the date of the bill starts from 5th March and not from 1st March. If the maturity date happens to be a gazetted holiday, then the bill is payable one day before. However, if the maturity date happens to be a casual holiday, then the bill is payable after one day.

3. At sight bill: In case of at sight bill, the due date of the bill is considered as and when the bill is presented for payment by the holder of the bill. In this case, there is no grace period. The bill becomes due whenever it is presented for payment.

#### Question 6:

What is meant by dishonour of a bill of exchange?

Dishonour of a bill happens when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hence, liability of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer

 Acceptor A/c Dr. To Bills Receivable A/c (Bill dishonoured)

In the books of acceptor/drawee

 Bills Payable A/c Dr. To Drawer A/c (Bill dishonoured)

#### Question 7:

Name the parties to a promissory note

The parties to a promissory note are given below.

1. Promissor, who makes the note and undertakes to pay the amount of promissory note.

2. Payee, who receives the payment.

#### Question 8:

What is meant by acceptance of a bill of exchange?

A bill is drawn in favour of a person from whom the amount is due. In other words, a bill of exchange is drawn by the creditors on his/her debtors to make payment of specific amount, on a mentioned date. Generally, a bill is drawn by a seller to a purchaser. Purchaser accepts the bill for the amount due on account of the credit sales. The bill may be accepted for the amount due other than credit purchases, such as commission payable, salary outstanding, etc. A bill cannot come into existence without the acceptance of a debtor.

#### Question 9:

What is Noting of a bill of exchange.

When a bill is presented for payment and acceptor fails to make payment, the bill gets dishonoured. In order to keep a legal proof of dishonour, the bill gets noted by the Notary public (which is approved by the government). In exchange of the Notary service, Notary public charges fees, known as Noting charges. Notary public notes the following facts:

1. Date and amount of the bill

2. Reasons for dishonour

3. Amount of Noting charges

#### Question 10:

What is meant by renewal of a bill of exchange?

When an acceptor of a bill does not have sufficient fund to meet the obligations of the bill on time, he/she requests the drawer for extension (of time) for payment. If the drawer agrees, then a new bill is drawn which is known as renewal of bill. Generally, a bill is renewed on the condition that the drawee has to pay interest for the extended period.

#### Question 11:

Give the performa of a Bills Receivable Book.

 Serial Number of Bill Date Received Date of Bill Received From Whom Drawer Acceptor Where payable Term Due date Ledger Folio Amount Cash Book Folio Remarks

#### Question 12:

Give the performa of a Bills Payable Book.

 Serial Number of Bill Date of Bill Given To Whom Drawer Payee Payable Where Term of Bill Due Date Ledger Folio Amount Paid Date Cash Book Folio Remarks

#### Question 13:

What is retirement of a bill of exchange?

When a holder receives the amount of a bill before the maturity date on the request of the acceptor, then it is called retirement of the bill of exchange. Holder of the bill may give discount for such earlier payment. This discount is termed as ‘rebate’.

Entry in the books of the holder of the bill

 Cash A/c Dr. Rebate A/c Dr. To Bills Receivable A/c (Bill amount received before maturity and rebate allowed)

Entry in the books of the acceptor (drawee) of the bill

 Bills Payable A/c Dr. To Cash A/c To Rebate A/c (Bill paid and received rebate for early payment)

#### Question 14:

Give the meaning of rebate.

If the drawee expresses his/her wish to pay the bill before the due date to the holder, and if the holder accepts his/her request, then on account of the early payment, the holder may give some discount. This discount is termed as rebate. In other words, rebate is a discount given by the holder to the drawee (or acceptor) for his/her request of early payment of the bill before the due date. It is an expense for the drawer and hence, is debited to the drawer’s books. On the other hand, as it is a gain for the acceptor of bill, so it is credited in the drawee’s books.

Entry in the books of drawer of the bill:

 Cash A/c Dr. Rebate A/c Dr. To Bills Receivable A/c (Bill honoured before maturity)

Entry in the books of drawee of the bill:

 Bills Payable A/c Dr. To Cash A/c To Rebate A/c (Bill paid and rebate received)

#### Question 15:

Give the performa of a Bill of Exchange.

Performa of a Bill of exchange is given below.

 Mr. X (The Drawer) Rs 25,000 New Delhi May 01, 2011 Two months after date pay to me or my order, the sum of rupees twenty five thousand only, for value received Accepted (Signed) To Mr. Z (The Drawee) May 01, 2011 Tilak Nagar, New Delhi 110018 (Signed) Mr. X Janak Puri, New Delhi 110032

#### Question 1:

A bill of exchange must contain an unconditional promise to pay. Do you agree with a statement?

According to Negotiable Instrument Act, 1981, “A bill of exchange is defined as an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”

A bill of exchange contains an unconditional promise to pay a certain sum of money on an agreed date to the drawer or the bearer by the drawee of the bill.

An unconditional order to pay: It is one of the important characteristic of a negotiable instrument. Unconditional order implies no condition should be attached by the acceptor regarding the payment. The conditions like, payment of bill (only in case of profit on sales), payment of bill (only if the prices of goods increase), etc. should not be attached with the bill. Moreover, the language of the bill should not be ambiguous.

#### Question 1:

On Jan 01, 2016 Rao sold goods Rs 10,000 to Reddy. Half of the payment was made immediately and for the remaining half Rao drew a bill of exchange upon Reddy payable after 30 days. Reddy accepted the bill and returned it to Rao. On the due date Rao presented the bill to Reddy and received the payment Journalise the above transactions in the books Rao and prepare of Rao’s account in the books of Reddy.

 Books of Rao Journal Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Jan.01 Reddy Dr. 10,000 To Sales A/c 10,000 (Goods sold to Reddy) Jan.01 Cash A/c Dr. 5,000 To Reddy 5,000 (Cash received from Reddy) Jan.01 Bills Receivable A/c Dr. 5,000 To Reddy 5,000 (Bill received for 30 days accepted by Reddy) Feb.03 Cash A/c Dr. 5,000 To Bills Receivable A/c 5,000 (Reddy's acceptance met on due date)

 Books of Reddy Rao'sAccount Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs Jan.01 Cash 5,000 2011 Jan.01 Bills Receivable 5,000 Jan.01 Purchases 10,000 10,000 10,000

#### Question 2:

On Jan 01,2016, Shankar purchased goods from Parvati for Rs 8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary Journal entries in the books of Parvati and Shankar.

 Books of Parvati Journal Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Jan.01 Shankar Dr. 8,000 To Sales A/c 8,000 (Goods sold to Shankar) Jan.01 Bills Receivable A/c Dr. 8,000 To Shankar 8,000 (Promissory Note received from Shankar for three months) Apr.05 Cash A/c Dr. 8,000 To Bills Receivable A/c 8,000 (Cash received for Promissory Note one day after the maturity date on account of holiday declared by Govt.)

 Books of Shankar Journal Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Jan.01 Purchases A/c Dr. 8,000 To Parvati 8,000 (Goods purchased from Parvati) Jan.01 Parvati Dr. 8,000 To Bills Payable A/c 8,000 (Promissory note for three months sent to Parvati) Apr.5 Bills Payable A/c Dr. 8,000 To Cash A/c 8,000 (Cash paid on maturity of promissory note)

Note: Here, it has been assumed holiday on Apr.04, 2016 is emergency holiday if it had gazetted holiday, the Promissory Note should have been discharged on Apr.05, 2011.

#### Question 3:

Vishal sold goods for Rs 7,000 to Manju on Jan 05, 2016 and drew upon her a bill of exchange payable after 2 months. Manju accepted Vishal’s draft and handed over the same to Vishal after acceptance. Vishal immediately discounted the bill with his bank@12% p.a. On the due date Manju met her acceptance. Journalise the above transactions in the books of Vishal and Manju.

 Books of Vishal Journal Date Particulars L.F. Debit Amount  Rs Credit  Amount  Rs 2016 Jan.05 Manju Dr. 7,000 To Sales A/c 7,000 (Goods sold to Manju) Jan.05 Bills Receivable A/c Dr. 7,000 To Manju 7,000 (Manju's acceptance received for two months) Jan.05 Bank A/c Dr. 6,860 Discount A/c Dr. 140 7,000 To Bills Receivable A/c (Bill Receivable discounted with the bank @ 12 % p.a. for two months)

 Books of Manju Journal Date Particulars L.F. Debit  Amount Rs Credit Amount Rs 2016 Jan.05 Purchases A/c Dr. 7,000 To Vishal 7,000 (Goods purchased from Vishal) Jan.05 Vishal Dr. 7,000 To Bills Payable A/c 7,000 (Bill drawn by Vishal accepted) Mar.08 Bills Payable A/c Dr. 7,000 To Bank A/c 7,000 (Amount of Bill Payable paid to bank on maturity)

#### Question 4:

On Feb 01, 2016, John purchased goods for Rs 15,000 from Jimmi. He immediately made a payment of Rs 5,000 by cheque and for the balance accepted the bill of exchange drawn upon him by Jimmi. The bill of exchange was payable after 40 days. Five days before the maturity of the bill, Jimmi sent the same to his bank for collection. The bank duly presented the bill to John on the due date who met the bill. The bank informed the same to Jimmi. Prepare John’s account in the books of Jimmi and Jimmi account in the books of John.

 Books of Jimmi Journal Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Feb.01 John Dr. 15,000 To Sales A/c 15,000 (Goods sold to John) Feb.01 Bank A/c Dr. 5,000 To John 5,000 (Cheque received for Rs 5,000 from John) Feb.01 Bills Receivable A/c Dr. 10,000 To John 10,000 (Bill received from John for 40 days) Mar.10 Bill Sent for Collection A/c Dr. 10,000 To Bills Receivable A/c 10,000 (John's acceptance sent to bank for collection) Mar.15 Bank A/c Dr. 10,000 To Bill Sent for Collection A/c 10,000 (John's acceptance met on due date and bank received the payment)

 Ledger  John's Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2016 2016 Feb.01 Sales 15,000 Feb.01 Bank 5,000 Feb.01 Bills Receivable 10,000 15,000 15,000

 Books of John Journal Date Particulars L.F. Debit  Amount  Rs Credit Amount Rs 2016 Feb.01 Purchases A/c Dr. 15,000 To Jimmi 15,000 (Goods purchased from Jimmi) Feb.01 Jimmi Dr. 5,000 To Bank A/c 5,000 (Cheque paid to Jimmi) Feb.01 Jimmi Dr. 10,000 To Bills Payable A/c 10,000 (Bill drawn by Jimmi accepted for 40 days) Mar.15 Bills Payable A/c Dr. 10,000 To Bank A/c 10,000 (Payment of bill made on maturity to bank)

 Ledger  Jimmi's Account Dr. Cr. Date Particulars J.F. Amount Rs Date Particulars J.F. Amount Rs 2016 2016 Feb.01 Bank 5,000 Feb.01 Purchases 15,000 Feb.01 Bills Payable 10,000 15,000 15,000

#### Question 2:

Briefly explain the effects of dishonour and noting of a bill of exchange.

When a bill is presented for payment and the acceptor fails to make the payment, the bill gets dishonoured. In this situation, liability of the acceptor is restored.

Entry in the books of drawer (if Noting charges are not paid):

 Drawee Dr. To Bills Receivable A/c (Bill dishonoured)

Entry in the books of drawee:

 Bills Payable A/c Dr. To Drawer (Bill dishonoured)

Noting charges are charged by the notary public for keeping a proof that the bill is dishonoured. The noting charges are paid by the holder of the bill but actually due on the drawee or the acceptor of the bill..

Notary public notes the below given facts.

1. Date and amount of bill

2. Reasons for dishonour

3. Amount of noting charges

Effect of Noting charges in the books of holder of bill (if Noting charges are paid):

 Drawee Dr. To Bills Receivable A/c To Cash A/c (Noting charges) (Bill dishonoured and Noting charges paid)

In the books of drawee:

 Bills Payable A/c Dr. Noting charges A/c Dr. To Drawer (Bill dishonoured and Noting charges due)

#### Question 3:

Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.

The procedure to calculate the date of maturity of a bill of exchange is given below.

1. Ascertain the date on which the bill will be honoured.

2. Add three days of grace to the above date.

For example, a bill with maturity period of one month is drawn on 1st July and due date is 1st September. Then add 3 days of grace and payment will be made on 4th September.

Days of grace depend on the following situations:

1. Declared holidays: If the payment day happens to be a national holiday or Sunday, then the preceding day becomes the payment day.

For example,

1. If a bill is drawn on 12th July and its due date is 12th August, then after adding 3 days of grace the maturity day is 15th August. However, as 15th August is a national holiday; so, 14th August becomes the payment day.

2. If a bill is drawn on 1st May and the maturity period is of one month, then the due date is 1st June. After adding 3 days of grace, the payment date becomes 4th June. However, if 4th June happens to be a Sunday, then the payment will be made on 3rd June.

2. Undeclared holidays: If the payment day happens to be an emergency holiday, then the succeeding day becomes the payment day. For example, if a bill is drawn on 1st May and is payable after 15 days, then, after adding 3 days of grace period, the due date becomes 18th May. However, if a national strike is declared on 18th May, then 19th May becomes the due date of the bill.

#### Question 4:

Distinguish between bill of exchange and promissory note.

 Basis of Difference Bills of Exchange Promissory Note Order or promise It is an order to pay. It is a promise to pay. Parties There are three parties involved, drawer, acceptor and payee. There are two parties involved, maker and payee. Drawer It is drawn by the creditor. It is drawn by the debtors. Acceptance It needs acceptance by the drawee. As it is prepared by promissor, so no acceptance is required. Payee Drawer and payee may be the same. Promissor cannot be the payee. Noting In case of dishonour of the bill, the bill may get noted. Noting is not necessary. Liability Drawer is not primarily liable. Promissor is the primarily liable.

#### Question 5:

Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.

When a holder receives the amount of a bill before the maturity date on request of the acceptor, it is called retirement of the bill of exchange. Holder of the bill may give discount for such earlier payment. This discount is termed as ‘rebate’.

Rebate is given by the holder to the acceptor of the bill on account of payment before the due date. Rebate is a loss for the holder of the bill; so, it is debited in the books of the holder when payment is received.

 Cash A/c Dr. Rebate A/c Dr. To Bills Receivable A/c (Payment received and rebate allowed for early payment)

Acceptor of the bill gets rebate for the payment made before the due date. The rebate is a gain for the drawee; so, it is credited in the books of the drawee.

 Bills Payable A/c Dr. To Cash A/c To Rebate A/c (Bill paid before the due date and rebate received for early payment)

#### Question 6:

Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.

Bills Receivable Book is a special purpose book that is maintained to keep records of bills received from the debtors. It contains details such as acceptor’s name, date of bill, due date, amount, etc. for future references. It is totalled periodically and its balance is transferred to the debit side of the bills receivable account.

Benefits of Maintaining the Bill Receivable Book

1. Availability of information: All the information related to the bills receivable, such as amount, due date, etc., are recorded at one place and hence are easily accessible.

2. Possibility of fraud: Since all the bills are recorded at one place, possibility of fraud is minimised.

3. Responsibility: The person who maintains the bills receivable book will also be responsible for any errors or omissions. Therefore, higher degree of accountability and responsibility exists. Also, if any error is detected, then it can be fixed quickly.

4. Time efficient: Recording of bills receivable through the bills receivable book takes lesser time than that of journal entry. Therefore, it saves time of the accountant in recording numerous transactions of repetitive and routine nature.

#### Question 7:

Briefly explain the benefits of maintaining a Bills Payable Book and state how is its posting is done in the ledger?

A Bills Payable Book is a special purpose book, maintained to keep records of acceptance of bills, given to the creditors. It contains details of the amount, date of bill, due date, to whom acceptance is given, etc., for future references. It is totalled periodically and its balance is transferred to the credit side of the bills payable account.

Benefits of Maintaining Bills Payable Book

1. Availability of information: All the information related to the bills payable are recorded at one place, such as the amount, due date, etc.

2. Possibility of fraud: Since all the bills are recorded at one place, possibility of fraud is minimised.

3. Responsibility: All the transactions are recorded by the same person. Therefore, errors can be easily detected and rectified. This leads to a higher degree of responsibility and accountability of the accountant.

#### Question 5:

On Jan 15, 2015, Kartar Sold goods for Rs 30,000 to Bhagwan and drew upon him three bills of exchanges of Rs 10,000 each payable after one month, two month, and three months respectively. The first bill was retained by Kartar till its maturity. The second bill was endorsed by him in favour of his creditor Ratna and the third bill was discounted by him immediately @ 6% p.a. All the bills were met by Bhagwan. Journalise the above transactions in the books of Kartar and Bhagwan. Also prepare ledger accounts in books of Kartar and Bhagwan.

 Journal Entries in the Books of Kartar Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2015 Jan.15 Bhagwan Dr. 30,000 To Sales A/c 30,000 (Goods sold to Bhagwan) Jan.15 Bills Receivable A/c Dr. 10,000 To Bhagwan 10,000 (Three bills of Rs 10,000 each, received from Bhagwan–first bill for one month, second bill for two months and third bill for three months) Jan.15 Ratna Dr. 10,000 To Bills Receivable A/c 10,000 (Second bill endorsed to Ratna) Jan.15 Bank A/c Dr. 9,850 Discount A/c Dr. 150 To Bills Receivable A/c 10,000 (B/R discounted) Feb.19 Cash A/c Dr. 10,000 To Bills Receivable A/c 10,000 (First bill for one month met by Bhagwan, on due date)

 Bhagwan’s Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Jan. 15 Sales A/c 30,000 Jan. 15 Bills Receivable A/c 30,000 30,000 30,000
 Ratna’s Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Jan. 15 Bills Receivable A/c 10,000 Jan. 15 Balance b/d 10,000 10,000 10,000
 Bills Receivable Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Jan. 15 Bhagwan 30,000 Jan. 15 Ratna 10,000 Jan. 15 Bank A/c 9,850 Jan. 15 Discount A/c 150 Feb. 19 Cash 10,000 30,000 30,000
 Cash Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Feb. 19 Bills Receivable 10,000 Feb. 19 Balance c/d 10,000 10,000 10,000
 Bank’s Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Jan. 15 Bills Receivable 9,850 Jan. 15 Balance c/d 9,850 9,850 9,850

 Journal Entries in the Books of Bhagwan Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2015 Jan.15 Purchases A/c Dr. 30,000 To Kartar 30,000 (Good purchased from Kartar on credit) Jan.15 Kartar Dr. 30,000 To Bills Payable A/c 30,000 (Three bill Rs 10,000 each drawn by Kartar– The first bill for one month, the second bill for two months and the third bill for three months, accepted and  returned them to Kartar) Feb.19 Bills Payable A/c Dr. 10,000 To Cash A/c 10,000 (First bill was paid on due date) Mar.19 Bills Payable A/c Dr. 10,000 To Bank A/c 10,000 (Second bill was paid on due date to Ratna) Apr.19 Bills Payable A/c Dr. 10,000 To Bank A/c 10,000 (Third bill was paid on due date to bank)

 Kartar’s Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Jan. 15 Bills Payable A/c 30,000 Jan. 15 Purchases 30,000 30,000 30,000

 Bills Payable Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Feb. 19 Cash A/c 10,000 Jan. 15 Kartar 30,000 Mar. 19 Bank A/c 10,000 Apr. 19 Bank A/c 10,000 30,000 30,000

 Cash Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Feb. 19 Balance b/d 10,000 Feb. 19 Bills Payable A/c 10,000 10,000 10,000

 Bank’s Account Dr. Cr. Date Particulars J.F. Amount (Rs) Date Particulars J.F. Amount (Rs) 2015 2015 Mar. 15 Balance b/d 20,000 Mar. 19 Bills Payable A/c 10,000 Apr. 19 Bills Payable A/c 10,000 20,000 20,000

#### Question 6:

On Jan. 01, 2016 Arun sold goods for Rs 30,000 to Sunil. 50% of the payment was made immediately by Sunil on which Arun allowed a cash discount of 2%. For the balance Sunil drew a promissory note in favour of Arun payable after 20 days. Since, the date of maturity of bill was a public holiday, Arun presented the bill on a day, as per the provisions of Negotiable Instrument Act which was met by Sunil. State the date on which the bill was presented by Arun for payment and Journalise the above transactions in the books of Arun and Sunil.

 Journal Entries in the Books of Arun Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.01 Sunil Dr. 30,000 To Sales A/c 30,000 (Goods sold to Sunil) Jan.01 Cash A/c Dr. 14,700 Discount Allowed A/c Dr. 300 To Sunil 15,000 (Half of the amount due from Sunil was received and  allowed him 2% Cash Discount) Jan.01 Bills Receivable A/c Dr. 15,000 To Sunil 15,000 (Promissory note received for 20 days from Sunil  for balance amount due from Sunil) Jan.23 Cash A/c Dr. 15,000 To Bills Receivable A/c 15,000 (Cash received from Sunil for B/R one day before  maturity, as per negotiable instrument act, if the date of maturity is holiday, negotiable instrument  will be met one day before maturity)

Note: Date of maturity of the promissory note is Jan. 24, 2016, on account of holiday, it will be presented one day earlier that is on Jan. 23, 2016.

 Journal Entries in the Book of Sunil Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Jan.01 Purchases A/c Dr. 30,000 To Arun 30,000 (Goods purchased from Arun) Jan.01 Arun Dr. 15,000 To Cash A/c 14,700 To Discount Received A/c 300 (Half amount due to Arun paid by cheque and 2%  discount allowed by him) Jan.01 Arun Dr. 15,000 To Bills Payable A/c 15,000 (Promissory note issued in favour of Arun for twenty days) Jan.23 Bills Payable A/c Dr. 15,000 To Cash A/c 15,000 (Promissory note met one day before the maturity day)

#### Question 7:

Darshan sold goods for Rs 40,000 to Varun on 8.1.2016 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date the bill was met by Varun. Record the necessary Journal entries in the books of Darshan and Varun in the following circumstances.

·         When the bill was retained by Darshan till the date of its maturity.

·         When Darshan immediately discounted the bill @ 6% p.a. with his bank.

·         When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

·         When three days before its maturity, the bill was sent by Darshan to his bank for collection.

Case (i): When the bill was retained by Darshan till the date of its maturity

 Journal Entries in the Books of Darshan Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.08 Varun Dr. 40,000 To Sales A/c 40,000 (Goods sold to Varun) Jan.08 Bills Receivable A/c Dr. 40,000 To Varun 40,000 (Varun's acceptance received for two months) Mar.11 Cash A/c Dr. 40,000 To Bills Receivable A/c 40,000 (Payment for B/R received for B/R)

 Journal Entries in the Books of Varun Date Particulars L.F Debit Amount Rs Credit Amount Rs 2016 Jan.08 Purchases A/c Dr. 40,000 To Darshan 40,000 (Goods bought from Darshan) Jan.08 Darshan Dr. 40,000 To Bills Payable A/c 40,000 (Bill of two months accepted for Darshan) Mar.11 Bills Payable A/c Dr. 40,000 To Cash A/c 40,000 (Varun cleared his acceptance on the due date)

Case (ii): When Darshan immediately discounted the bill @ 6% p.a. with the bank.

 Journal Entries in the Books of Darshan Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.08 Varun Dr. 40,000 To Sales A/c 40,000 (Goods sold to Varun) Jan.08 Bills Receivable A/c Dr. 40,000 To Varun 40,000 (B/R received from Varun for two months) Jan.08 Bank A/c Dr. 39,600 Discount A/c Dr. 400 To Bills Receivable A/c 40,000 (B/R discounted from bank @ 6 p.a.)

 Journal Entries in the Books of Varun Date Particulars L.F. Debit Amount Rs Credit Amount Rs 2016 Jan.08 Purchases A/c Dr. 40,000 To Darshan 40,000 (Goods bought from Darshan) Jan.08 Darshan Dr. 40,000 To Bills Payable A/c 40,000 (Bill of two months accepted for Darshan) Mar.11 Bills Payable A/c Dr. 40,000 To Bank A/c 40,000 (Varun cleared his acceptance on the due date)

Case (iii): When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

 Journal Entries in the Books of Darshan Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.08 Varun Dr. 40,000 To Sales A/c 40,000 (Goods sold to Varun) Jan.08 Bills Receivable A/c Dr. 40,000 To Varun A/c 40,000 (Varun's acceptance received for two months) Jan.08 Suresh A/c Dr. 40,000 To Bills Receivable A/c 40,000 (Varun's acceptance endorsed in favour of Suresh)

 Journal Entries in the Books of Varun Date Particulars L.F Debit Amount Rs Credit Amount Rs 2016 Jan.08 Purchases A/c Dr. 40,000 To Darshan 40,000 (Goods bought from Darshan) Jan.08 Darshan Dr. 40,000 To Bills Payable A/c 40,000 (Bill drawn by Darshan accepted for two months) Mar.11 Bills Payable A/c Dr. 40,000 To Cash A/c 40,000 (Bill paid to the holder of bill)

Case (iv): When three days before its maturity, the bill, as sent by Darshan to his bank for Collection.

 Journal Entries in the Books of Darshan Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.08 Varun A/c Dr. 40,000 To Sales A/c 40,000 (Goods sold to Varun) Jan.08 Bills Receivable A/c Dr. 40,000 To Varun A/c 40,000 (Varun's acceptance received for two months) Mar.08 Bill Sent for Collection A/c Dr. 40,000 To Bills Receivable A/c 40,000 (Bill sent for collection sent to the bank) Mar.11 Bank A/c Dr. 40,000 To Bill Sent for Collection 40,000 (Bill amount was met)

 Journal Entries in the Books of Varun Date Particulars L.F. Debit  Amount  Rs Credit  Amount  Rs 2016 Jan.08 Purchases A/c Dr. 40,000 To Darshan 40,000 (Goods bought from Darshan) Jan.08 Darshan Dr. 40,000 To Bills Payable A/c 40,000 (Bill drawn by Darshan accepted for two  months) Mar.11 Bills Payable A/c Dr. 40,000 To Bank A/c 40,000 (Bill paid to the bank)

#### Question 8:

Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan traders, who runs a retail shop made the following purchases from Bansal Traders.

 Date Amount Rs Dec.21, 2016 1,000 Dec.26, 2016 1,200 Dec.18, 2016 2,000 Dec.31, 2016 5,000