On 14th May, 2012 Rohit sold goods on credit to Devidas for Rs. 30,000 on the same date Rohit draws a bill on Devidas for Rs. 30,000 at 4 months. Devidas accepted it an returned to Rohit.

On 17th June, 2012 rohit discounted the bill with his bank @ 10% p.a.
On due date Devidas finds himself unable to make payment of the bill and requests Rphit to renew it.
Rohit accepted the proposal on the condition that Devidas should pay Rs. 10,000 on account along with interest Rs. 500 in cash and should accept a new bill for the balance at 2 months.
These arrangements were carried though.
Give Journal Entries in the Books of Rohit.
Solution:
Journal Entries in the Books of Rohit.
Date
Particulars
L.F.
No.
Debit

Credit
14.5.12
Devidas’s A/c ……… Dr.

30000


To Sales A/c


30000

[Being goods sold on credit]



14.5.12
Bills Receivable A/c ……… Dr.

30000


To Devidas’s A/c


30000

[Being  the Bill is drawn]



17.6.12
Bank A/c ……… Dr.

29250


Discount A/c ……… Dr.

750


To Bills Receivable A/c


30000

[Being the bill is discounted]



17.9.12
Devidas’s A/c ……… Dr.

30000


To Bank A/c


30000

[Being the discounted bill is dishonoured]



17.9.12
Devidas’s A/c ……… Dr.

500


To Interest A.c


500

[Being the Interest is charged on balance amount]



17.9.12
Cash A/c ……… Dr.

10500


To Devidas’s A/c


10500

[Being Part payment along with interest received ]



17.9.13
Bills Receivable A/c ………Dr.

20000


To Devidas’s A/c


20000

[Being the new bill is drawn for the balance amount]



Working Notes:
(1) Discount charged by the bank = Amount of Bill × Period × Rate of Discount
Discount Charged by the Bank = 30000 × (3/12) × (10/100) = Rs. 750
[Note: Period of the bill is for 4 months but it is discounted one month after, therefore the period of the bill is to be considered for 3 months only.]
(2) Amount of New Bill = Amount of Dishonoured bill + Interest on balance Amount – Part Payment.

Amount of New Bill = 30000 + 500 – 10500 = Rs. 20,000.