Question

Sangeeta accepted a bill for ₹ 18,000 drawn by Geeta at 3 months. Geeta discounted the bill for ₹ 17,400. Before the due date Sangeeta approached Geeta for renewal of the bill. Geeta agreed on the condition that Sangeeta should pay  ₹ 6,000 immediately and for the balance, she should accept a new bill for 4 months along with interest ₹ 550. The arrangements were carried through. But on the due date of new bill Sangeeta became insolvent and 35 paise in a rupee could be recovered from her estate.

Give Journal Entries in the Books of Sangeeta and prepare Sangeeta’s account in the books of Geeta.

Answer 1

In the books of Sangeeta Journal Entries
Date	Particulars	L.F	Debit (₹)	Credit (₹)
1	Geeta’s A/c   ...Dr.		18,000
	To Bill Payable A/c			18,000
	(Being our acceptance is given)
2	No Entry Note: It's  Transaction between Bank and Geeta.
3	Bills Payable A/c   ...Dr.		18,000
	To Geeta’s A/c			18,000
	(Being bill cancelled on our request.)
4	Geeta’s A/c   ...Dr.		6,000
	To Bank A/c			6,000
	(Being part payment paid)
5	Interest A/c   ...Dr.		550
	To Geeta’s A/c			550
	(Being the interest due on balance amount to be paid)
6	Geeta’s A/c   ...Dr.		12,550
	To New Bills Payable A/c			12,550
	(Being the acceptance given for balance amount plus amount of interest)
7	New Bills Payable A/c   ...Dr.		12,550
	To Geeta’s A/c			12,550
	(Being new bill dishonoured)
8	Geeta’s A/c   ...Dr.		12,550
	To Cash A/c			4,393
	To Deficiency A/c			8,157
	(Being 35 % of the amount due paid and balance credited to deficiency A/c)
			80200	80200

 

Dr.	In the books of Geeta Sangeeta’s Account							Cr.
Date		Particulars	J.F	Amount (₹)	Date	Particulars	J.F	Amount (₹)
-		To Balance b/d		18,000	1	By Bill Receivable A/c (Acceptance received)		18,000
3		To Bank A/c (Dishonour)		18,000	4	By Bank A/c (Part payment)		6000
5		To Interest A/c (Int. due)		550	6	By Bills Receivable A/c (New acceptance)		12,550
7		To Bills Receivable A/c (Dishonour)		12,550	8	By Cash A/c		4,393
						By Bad debts A/c		8,157
				49,100				49,100

Working Notes:

(1) It is advisable to write journal entries in the books of Geeta also to get entries in ‘Sangeeta’s Account’ property.

In the books of Geeta Journal Entries
Date	Particulars	L.F	Debit (₹)	credit (₹)
1	Bills Receivable A/c   ...Dr.		18,000
	To Sangeeta’s A/c			18,000
2	Bank A/c   ...Dr.		17,400
	Discount A/c   ...Dr.		600
	To Bills Receivable A/c			18,000
3	Sangeeta’s A/c   ...Dr.		18,000
	To Bank A/c (Cancellation of discounted bill)			18,000
4	Bank A/c   ...Dr.		6,000
	To Sangeeta’s A/c			6,000
5	Sangeeta’s A/c   ...Dr.		550
	To Interest A/c			550
6	Bills Receivable A/c   ...Dr.		12,550
	To Sangeeta’s A/c			12,550
7	Sangeeta’s A/c   ...Dr.		12,550
	To Bills Receivable A/c			12,550
8	Cash A/c   ...Dr.		4,393
	Bad debts A/c   ...Dr.		8,157
	To Sangeeta’s A/c			12,550
			98200	98200