Krishna accepted a bill for three months drawn by Rama for Rs. 4000. Rama discounted the bill with the bank at Rs. 3900. On the date of maturity, the bill was dishonoured. Rama paid noting charges for Rs. 20. Krishna paid half the amount for the bill and full amount of the noting charges and accepted a bill for the balance including interest of Rs. 50. The second bill was duly honoured. Pass necessary journal entries in the books of Rama and show Krishna’s account.

Journal Entries in the Books of Rama

Date	Particulars	LF	Debit (Rs)	Credit (Rs)
? 1	Bills Receivable A/c .... Dr.		4000
	To Krishna's A/c			4000
	[Being the bill is drawn]
2	Bank A/c .... Dr.		3900
	Discount A/c		100
	To Bills Receivable A/c			4000
	[Being the Bill is discounted]
3.	Krishna's A/c .... Dr.		4020
	To Bank A/c			4020
	[Being the discounted bill is dishonoured along with noting Charges]
4	Krishna's A/c .... Dr.		50
	To Interest A/c			50
	[Being the interest is charged]
5	Bank A/c .... Dr.		2020
	To Krishna's A/c			2020
	[Being the Part Payment is Made along with Noting Charges]
6.	Bills Receivable A/c .... Dr.		2050
	To Krishna's A/c			2050
	[Being the new bill is drawn along with interest]
7.	Bank A/c .... Dr.		2050
	To Bills Receivable A/c			2050
	[Being the new bill is duly honoured]

In the Books of Rama

Krishna's A/c

Date	Particulars	J F	Amount	Date	Particulars	J F	Amount
?	To Balance b/d		4000	1.	By Bills Receivable A/c		4000
2.	To Bank A/c		4020	4.	By Bank A/c		2020
3.	To Interest A/c		50	5	By Bills Receivable A/c		2050
			8070				8070