Question
On 1st March, 2013. Ramchandra sold goods to Raman worth Rs. 8,000/- and Raman accepted the Bill for Rs. 8,000/- at 3 months drawn by Ramchandra. Ramchandra discounted the bill with his bank @ 6% p.a. On due date the bill was dishonoured and Raman requested Ramchandra to accept Rs. 4,000/- immediately and draw upon him a new bill for the remaining amount at 3 months together with an interest @ 10% p.a. Ramchandra agreed. The second Bill was duly honoured. Give Journal entries in the books of Ramchandra.
Solution:
Journal Entries in the books of Ramchandra
Date (2013) Particulars L.F. Debit (Rs.) Credit (Rs.) Mar 1 Raman A/c ...Dr.
To Sales A/c
(Being goods sold to Raman on credit)8,000
8,000Mar 1 Bills Receivable A/c ...Dr.
To Raman A/c
(Being bill drawn for 3 months and accepted by Raman)8,000
8,000Mar 1 Bank A/c ...Dr.
Discount A/c ...Dr.
To Bills Receivable A/c
(Being the bill discounted with the bank @ 6% p.a. for 3 months)7,880
120
8,000June 4 Raman A/c ...Dr.
To Bank A/c
(Being the discounted bill dishonoured on due date)8,000
8,000June 4 Cash/Bank A/c ...Dr.
To Raman A/c
(Being part payment received from Raman)4,000
4,000June 4 Raman A/c ...Dr.
To Interest A/c
(Being interest due on balance of Rs. 4,000 @ 10% p.a. for 3 months)100
100June 4 Bills Receivable A/c ...Dr.
To Raman A/c
(Being new bill drawn for balance and interest for 3 months)4,100
4,100Sept 7 Cash/Bank A/c ...Dr.
To Bills Receivable A/c
(Being the new bill honoured on due date)4,100
4,100Working Notes:
- Discount Calculation: Rs. 8,000 × (6/100) × (3/12) = Rs. 120
- Due Date of First Bill: 1st March + 3 Months + 3 Days Grace = 4th June
- Interest Calculation: Rs. 4,000 (Balance) × (10/100) × (3/12) = Rs. 100
- New Bill Amount: Rs. 4,000 (Balance) + Rs. 100 (Interest) = Rs. 4,100
- Due Date of Second Bill: 4th June + 3 Months + 3 Days Grace = 7th September