Question

Nikhil sold goods for ₹ 23,000 to Akhil on Dec. 01, 2017. He drew upon Akhil a bill of exchange for the same amount payable after 2 months. Akhil accepted the bill and sent it back to Nikhil. Nikhil discounted the bill immediately with his bank @12 p.a. On the due date Akhil dishonoured the bill of exchange and the bank paid ₹ 100 as noting charges. Akhil requested Nikhil to draw a new bill upon him with interest @10% p.a. which he agreed. The new bill was payable after two months. A week before the maturity of the second bill Akhil requested Nikhil to cancel the second bill. He further requested to accept ₹ 10,000 in cash immediately and drew a third bill upon him including interest of ₹ 500. Nikhil agreed to Akhil’s request. The third bill was payable after one month. Akhil met the third bill on its maturity. Record the necessary journal entries in the books of Nikhil and Akhil and also prepare Akhil’s account in the books of Nikhil and Nikhil’s account in the books of Akhil.

Answer 1

Books of Nikhil Journal
Date	Particulars	L.F.	Debit Amount ₹	Credit Amount ₹
2017
Dec.01	Akhil Dr.		23,000
	To Sales A/c			23,000
	(Goods sold to Akhil)
Dec.01	Bills Receivable A/c Dr.		23,000
	To Akhil			23,000
	(Akhil's acceptance received)
Dec.01	Bank A/c Dr.		22,540
	Discount A/c Dr.		460
	To Bills Receivable A/c			23,000
	(Akhil's acceptance discounted at 12% p.a with bank)
2018
Feb.04	Akhil Dr.		23,100
	To Bank A/c			23,100
	(Akhil's acceptance dishonoured, bank paid ₹ 100 as noting charges)
Feb.04	Akhil Dr.		385
	To Interest A/c			385
	(Interest credited on account of bill dishonoured at 10% p.a. for two months)
Feb.04	Bills Receivable A/c Dr.		23,485
	To Akhil			23,485
	(New acceptance received from Akhil for next two months received)
Apr.01	Akhil Dr.		23,485
	To Bills Receivable A/c			23,485
	(The second bill cancelled one week before maturity)
Apr.01	Cash A/c Dr.		10,000
	To Akhil			10,000
	(Cash received from Akhil)
Apr.01	Akhil Dr.		500
	To Interest A/c			500
	(Interest due from Akhil for the bill)
Apr.01	Bills Receivable A/c Dr.		13,985
	To Akhil			13,985
	(Bill from Akhil received)
May.04	Cash A/c Dr.		13,985
	To Bills Receivable A/c			13,985
	(The third bill met on due date)

 

Dr.	Akhil's Account						Cr.
Date	Particulars	J.F.	Amount ₹	Date	Particulars	J.F.	Amount ₹
2017				2017
Dec.01	Sales		23,000	Dec.01	Bills Receivable		23,000
2018				2018
Feb.04	Bank		23,100	Feb.04	Bills Receivable		23,485
Feb.04	Interest		385	Apr.01	Cash		10,000
Apr.01	Bills Receivable		23,485	Apr.01	Bills Receivable		13,985
Apr.01	Interest		500
			70,470				70,470

 

Books of Akhil Journal
Date	Particulars	L.F.	Debit Amount ₹	Credit Amount ₹
2017
Dec.01	Purchases A/c Dr.		23,000
	To Nikhil			23,000
	(Goods bought from Nikhil)
Dec.01	Nikhil Dr.		23,000
	To Bills Payable A/c			23,000
	(Bill drawn by Nikhil payable after two months accepted)
2018
Feb.04	Bills Payable A/c Dr.		23,000
	Noting Charges A/c Dr.		100
	To Nikhil			23,100
	(Bill dishonoured on due date and ₹ 100 paid by the holder of bill)
Feb.04	Interest A/c Dr.		385
	To Nikhil A/c			385
	(Interest due to Nikhil for the bill dishonoured)
Feb.04	Nikhil Dr.		23,485
	To Bills Payable A/c			23,485
	(New bill accepted payable after two months)
Apr.01	Bills Payable A/c Dr.		23,485
	To Nikhil			23,485
	(Bill cancelled before maturity)
Apr.01	Nikhil Dr.		10,000
	To Cash A/c			10,000
	(Cash paid to Nikhil)
Apr.01	Interest A/c Dr.		500
	To Nikhil			500
	(Interest due to Nikhil for bill cancellation)
Apr.01	Nikhil Dr.		13,985
	To Bills Payable A/c			13,985
	(New bill accepted payable after one month)
May.04	Bills Payable A/c Dr.		13,985
	To Cash A/c			13,985
	(The third bill met on maturity)

 

Dr.	Nikhil Account						Cr.
Date	Particulars	J.F.	Amount ₹	Date	Particulars	J.F.	Amount ₹
2017				2017
Dec.01	Bills Payable		23,000	Dec.01	Purchases		23,000
2018				2018
Feb.04	Bills Payable		23,485	Feb.04	Bills Payable		23,000
Apr.01	Cash		10,000	Feb.04	Noting Charge		100
Apr.01	Bills Payable		13,985	Feb.04	Interest		385
				Apr.01	Bills Payable		23,485
				Apr.01	Interest		500
			70,470				70,470