Friday, January 13, 2017

Raja of Nagpur draws a bill on Pradhan of Bhandara for Rs. 6,000 at 3 months.

Q4. Raja of Nagpur draws a bill on Pradhan of Bhandara for Rs. 6,000 at 3 months. Pradhan accepted and returned it to Raja. Raja then sent the bill to bank for collection.

On due date, Pradhan finds himself unable to make payment of the bill and requests Raja to renew it. Raja accepted a proposal on the condition that, Pradhan should pay Rs. 1,000 on account along with interest Rs. 250 in cash and should accept new bill for the balance at 2 months. These arrangements were carried through. Afterwards, one month before due date of new bill Pradhan retired his acceptance by paying Rs. 4,850.

Give Journal entries in the books of Raja of Nagpur.  [10]

Answer:
Journal Entries in the books of Raja of Nagpur.


Date
Particulars
L.F.
Debit
Rs.
Credit
Rs.
(1)
Bills Receivable A/c ...... Dr.

6000


To Pradhan A/c


6000

[Being the bill is drawn]








(2)
Bank for collection A/c ....... Dr.

6000


To Bills Receivable A/c


6000

[Being the bill is sent for bank for collection]








(3)
Pradhan A/c ....... Dr.

6000


To Bank for collection A/c


6000

[Being the bill is dishonoured]








(4)
Pradhan A/c ....... Dr.

250


To Interest A/c


250

[Being interest is charged on balance Amount]








(5)
Cash A/c

1250


To Pradhan A/c


1250

[Being the part payment is made along with interest]








(6)
Bills Receivable A/c

5000


To Pradhan A/c


5000

[Being the new bill is drawn]








(7)
Cash / Bank A/c .... Dr.

4850


Rebate A/c ..... Dr.

150


To Bills Receivable A/c


5000

[Being the bill is retired]