Question

Priyanka owed Meena ₹ 18,000, Priyanka accepted a bill drawn Meena for the amount at 4 months. Meena endorsed the same bill to Sagar. Before due date Priyanka approached Meena for renewal of bill. Meena agreed on condition that ₹ 6,000 be paid immediately together with interest on the remaining amount of 8 % p. a. for 3 months and Priyanka should accept a new bill for the balance amount. These arrangements were carried through. However, before the due date, Priyanka became insolvent and only 50 % of the amount could be recovered from her estate.

Give Journal Entries in the Books of Meena.

Answer 1

In the books of Meena Journal Entries
Date	Particulars	L.F	Debit (₹)	Credit (₹)
1	Bills Receivable A/c Dr.		18,000
	To Priyanka’s A/c			18,000
	(Being bill drawn and acceptance is received)
2	Sagar’s A/c Dr		18,000
	To Bills Receivable A/c			18,000
	(Being bill endorsed in favour of Sagar)
3	Priyanka’s A/c Dr.		18,000
	To Sagar’s A/c			18,000
	(Being the bill cancelled at the request of Priyanka)
4	Cash A/c Dr		6,240
	To Interest A/c			240
	To Priyanka’s A/c			6,000
5	Bills Receivable A/c Dr		12,000
	To Priyanka’s A/c			12,000
	(Being new bill of remaining amount drawn and acceptance is received)
6	Priyanka’s A/c Dr		12,000
	To Bills Receivable A/c			12,000
	(Being the bill dishonoured for non-payment)
7	Cash A/c Dr		6,000
	Bad debts A/c Dr		6,000
	To Priyanka’s A/c			12,000
	(Being part payment received at the time of insolvency)
			96240	96240

Working Note :

Calculation of interest on remaining amount ₹12,000 @ 8 % p. a. and for 3 months I = `"PRN"/100 = 12,000 xx8/100 xx3/ 12` = ₹ 240