Chapter 8: Bills of Exchange

Q21Written answer

On Jan 01, 2017 Vibha sold goods worth ₹ 18,000 to Sudha and drew upon the latter a bill of exchange for the same amount payable after two months. Sudha accepted Vibha’s draft and returned the same to Vibha after acceptance. Vibha endorsed the bill immediately in favour of her creditor Geeta. Five days before the maturity of the bill Sudha requested Vibha to cancel the bill since she was short of funds. She further requested to draw a new bill upon her including interest of ₹ 200. Vibha accepted Sudha’s request. Vibha took the bill from Geeta by making the payment to her in cash and cancelled the same. Then she drew a new bill upon Sudha as agreed. The new bill was payable after one month. The new bill was duly met by Sudha on maturity. Record the necessary journal entries in the books of Vibha.

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Worked solution

The necessary journal entries are recorded as follows:

Books of Vibha Journal
Date		Particulars		L.F.	Debit ₹	Credit₹
2017
01 Jan	Sudha		Dr.		18,000
		To Sales A/c				18,000
	(Goods traded to Sudha)

01 Jan	Bills Receivable A/c		Dr.		18,000
		To Sudha				18,000
	(Sudha’s acceptance received)

01 Jan	Geeta		Dr.		18,000
		To Bills Receivable A/c				18,000
	(Sudha’s acceptance endorsed in favour of Geeta)

27 Feb	Sudha		Dr.		18,000
		To Geeta				18,000
	(Sudha cancelled the bill five days before the maturity)

27 Feb	Geeta		Dr.		18,000
		To Cash A/c				18,000
	(Cash paid to Geeta)

27 Feb	Sudha				200
		To Interest A/c				200
	(Interest credited to Sudha on account of cancelling the bill )

27 Feb	Bills Receivable A/c		Dr.		18,200
		To Sudha				18,200
	(New bill received from Sudha)

02 Mar	Cash A/c		Dr.		18,200
		To Sudha				18,200
	(Sudha’s acceptance met on due date)

Q22Written answer

Following was the position of debtor and creditor of Gautam as on 1.1.2017.

Debtors Creditors

₹ ₹

Babu 5,000 –

Chanderkala 8,000 –

Kiran 13,500 –

Anita 14,000 –

Anju – 5,000

Sheiba – 12,000

Manju – 6,000

The following transactions took place in the month of Jan 2017:

Jan. 02 Drew on Babu at two months after date at full settlement for ₹ 4,800. Babu accepted the bill and returned it on 5.1.2017.

Jan. 04 Babu’s bill discounted for ₹ 4,750.

Jan. 08 Chanderkala sent a promissory note for ₹ 8,000 payable three months after date.

Jan. 10 Promissory note established from Chanderkala discounted for ₹ 7,900

Jan. 12 Accepted Sheiba draft for the amount due payable two months after date.

Jan. 22 Anita sent his promissory note payable after two months.

Jan. 23 Anita’s promissory note endorsed in favour of Manju.

Jan. 25 Accepted Anju’s draft payable after three months.

Jan. 29 Kiran sent ₹ 2,000 in cash and a promissory note for the balance payable after three months.

Record the above transactions in the proper subsidiary books.

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Worked solution

The transactions are recorded in the books below:

Bills Receivable Book

No.

Date of Bill

2017

Date Received

2016

From whom

of Bill

Drawer

whom

received

Acceptor

Where

Term

Payable

Due date

2016

L.F.

Amount

₹

Cash

Book

Folio

Remarks

01

02 Jan

05 Jan

Babu

Self

Babu

2 months

05 Mar

4,800

Total

4,800

Bills Payable Book

No.

Date of Bill

2017

To Whom

Given

Drawer

Payee

Where

payable

Term

Due date

2017

Ledger

Amount

₹

Date

paid

Cash

Book

Folio

Remarks

01

12 Jan

Sheiba

–

2 months

15 Mar

12,000

02

25 Jan

Anju

–

2 months

28 Apr

5,000

Total

17,000

Cash Book
Dr.									Cr.
Date	Particulars	L.F.	Cash ₹	Bank ₹	Date	Particulars	L.F.	Cash ₹	Bank ₹
2017					2017
04 Jan	Bills Receivable			4,750
10 Jan	Bills Receivable			7,900
29 Jan	Kiran		2,000		31 Jan	Balance c/d		2,000	12,650

			2,000	12,650				2,000	12,650

Books of Gautam Journal
Date		Particulars				L.F.	Debit ₹	Credit₹
2017
05 Jan	Discount Allowed A/c			Dr.			200
			To Babu					200
	(Babu’s acceptance received and allowed him discount ₹ 200)

04 Jan	Discount A/c				Dr.		50
		To Bills Receivable A/c						50
	(Babu’s acceptance discounted with a discount charge of ₹ 50)

08 Jan	Bills Receivable A/c				Dr.		8,000
		To Chanderkala						8,000
	(Promissory Note from Chanderkala received)

10 Jan	Discount A/c			Dr.			100
		To Bills Receivable A/c						100
	(Chanderkala’s Promissory Note discounted with bank at discount of ₹ 100)

22 Jan	Bills Receivable A/c			Dr.			14,000
		To Anita						14,000
	(Promissory note established from Anita)

23 Jan	Manju				Dr.		14,000
		To Bills Receivable A/c						14,000
	(Anita’s Promissory Note endorsed to Manju)

29 Jan	Bills Receivable A/c				Dr.		11,500
		To Kiran						11,500
	(Promissory Note from Kiran received)

Q23Written answer

On Jan. 01, 2017 Harsh accepted a month bill for ₹ 10,000 drawn on him by Tanu for latter’s benefit. Tanu discounted the bill on same day @ 8% p.a. On the due date Tanu sent a cheque to Harsh for honour the bill. Harsh duly honoured his acceptance. Record the journal entries in the Books of Tanu and Harsh.

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Worked solution

The journal entries recorded are shown below:

Books of Tanu Journal
Date		Particulars		L.F.	Debit ₹	Credit₹
2017
01 Jan	Bills Receivable A/c		Dr.		10,000
		To Harsh				10,000
	(Harsh’s acceptance received)

01 Jan	Bank A/c		Dr.		9,933
	Discount A/c				67
		To Bills Receivable A/c				10,000
	(Harsh’s acceptance discounted at 8% p.a. for one month)

04 Feb	Harsha		Dr.		10,000
		To Bank A/c				10,000
	(Harsh’s account settled by paying amount due to Harsh through cheque)

Books of Harsh Journal
Date				Particulars		L.F.	Debit ₹	Credit₹
2017
01 Jan	Tanu				Dr.		10,000
			To Bills Payable A/c					10,000
	(Bill drawn by Tanu accepted)

04 Feb	Bank A/c				Dr.		10,000
		To Tanu						10,000
	(Cheque received from Tanu)

04 Feb	Bills Payable A/c				Dr.		10,000
		To Bank A/c						10,000
	(Bill drawn by Tanu met on due date)

Concepts covered in this chapter –

Meaning of Bill of Exchange
Parties to a Bill of Exchange
Promissory Note
Parties to a Promissory Note
Advantages of Bill of Exchange
Maturity of Bill
Discounting of Bill
Endorsement of Bill
Accounting Treatment
In the Books of Acceptor/Promissor

Conclusion

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Numerical Answers for Class 11 Accountancy Chapter 8 – Bill of Exchange