Archana purchased goods from Babita on credit for Rs. 20,000. On next day Archana paid Rs. 10,000 to Babita and accepted a bill drawn by Babita for the balance amount for four months. Babita discounted the bill with her bank for Rs. 9600/-. Before the due date Archana approached Babita with a request to renew the Bill. Babita agreed with the condition that Archana should pay Rs. 6000 along with interest of Rs. 120 and accept a new bill for the balance. These arrangements were duly carried out. New bill is met on the due date. Pass journal entries in the books of Babita.

Archana purchased goods from Babita on credit for Rs. 20,000. On next day Archana paid Rs. 10,000 to Babita and accepted a bill drawn by Babita for the balance amount for four months. Babita discounted the bill with her bank for Rs. 9600/-. Before the due date Archana approached Babita with a request to renew the Bill. Babita agreed with the condition that Archana should pay Rs. 6000 along with interest of Rs. 120 and accept a new bill for the balance. These arrangements were duly carried out. New bill is met on the due date. Pass journal entries in the books of Babita.

Solution:
Journal Entries in the booms of Babita.
Date
Particulars
LF
Debit
(Rs)
Credit
(Rs)
?  1.
Archana's A/c … Dr.

20000


To Sales A/c


20000

[Being the goods are sold]



2.
Cash/Bank A/c … Dr.

10000


To Archana's A/c


10000

[Being the part payment is made]



3.
Bills Receivable A/c …Dr.

10000


To Archana's A/c


10000

[Being the Bill is drawn]



3.
Bank A/c …Dr.

9600


Discount A/c … Dr.

400


To Bills Receivable A/c


10000

[Being the Bill is discounted with the bank]



4.
Archana's A/c … Dr.

10000


To Bank's A/c


10000

[Being the discounted bill is dishonoured]



5.
Archana's A/c … Dr.

120


To Interest A/c


120

[Being Interest is charged on balance amount]



6.
Cash / Bank A/c … Dr.

6120


To Archana's A/c


6120

[Being the part payment is made along with interest]



7.
Bills Receivable A/c …Dr.

4000


To Archana's A/c


4000

[Being the New bill is drawn for balance amount]



8.
Cash/Bank A/c …… Dr.

4000


To Bills Receivable A/c


4000

[Being the second bill is duly honoured]