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]