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