Baloo owes Kaloo Rs.8000. Kaloo then draws a bill for Rs. 8000 on Baloo for a period of three months. Baloo accepts and return it to Kaloo.

Baloo owes Kaloo Rs.8000. Kaloo then draws a bill for Rs. 8000 on Baloo for a period of three months. Baloo accepts and return it to Kaloo. Kaloo discounted the bill with his bank @ 12 % p.a. On due date, the bill was dishonoured noting charges amount to Rs. 30. Kaloo then draws a bill for the balance plus interest of Rs. 170. Before the due date of this bill Baloo pays the amount at a discount of Rs. 40 to retire the bill. Pass Journal Entries in the books of Kaloo.

Solution:
Journal Entries in the booms of Kaloo.

Date
Particulars
LF
Debit
(Rs)
Credit
(Rs)
1.
Bills Receivable A/c …Dr.

8000


To Baloo's A/c


8000

[Being the Bill is drawn]



2.
Bank A/c …Dr.

7760


Discount A/c … Dr.

240


To Bills Receivable A/c


8000

[Being the Bill is discounted with the bank]



3.
Baloo's A/c … Dr.

8030


To Bank's A/c


8030

[Being the discounted bill is dishonoured along with noting charges]



4.
Baloo's A/c … Dr.

170


To Interest A/c


170

[Being Interest is charged on balance amount]



5.
Bills Receivable A/c …Dr.

8200


To Baloo's A/c


8200

[Being the New bill is drawn for balance amount along with interest and noting charges]



6.
Cash / Bank A/c … Dr.

8160


Rebate's A/c … Dr.

40


To Bills Receivable A/c


8200

[Being the second bill is retired]