bills of exchange

Ravi sold goods for Rs.40,000 to Sudershan on Feb 13, 2015. He drew
four bills of exchange upon Sudershan. The first bill was for Rs.5,000
payable after one month. The second bill was for Rs.10,000 payable after
40 days; the third bill was for Rs.12,000 payable after three months and
fourth bill was for the balance amount payable after 19 days. Sudershan
accepted all the bills and returned the same to Ravi. Ravi discounted the
first bill with his bank at 6% p.a. He endorsed the second bill to his
creditor Mustaq for the full settlement of a debt of Rs.10,200. The third
bill was kept by Ravi with him till the date of maturity. Five days before
the maturity of the fourth bill, Ravi sent the bill to his bank for collection.
All the four bills were dishounoured by Sudarshan on maturity. Sudershan
settled Ravi’s claim in cash three days after the dishonour of each bill
along with interest @ 12% p.a. for the terms of the bills.
You are requested to record the necessary journal entries in the books
to Ravi, Sudershan, Mustaq and bank for the above transaction. Also
prepare Sudershan’s account and Mustaq’s account in the books
of Ravi.

asked Feb 26, 2016 in Bills of Exchange and Promissory Notes by kenamotiwala (29 points) 253 views

1 Answer

0 votes

Notes: 1. Three days of grace have been added while calculating date of maturity.

2. Discount charged by bank = 5000 x 6% x 1/12 = Rs.25

3. Interest on 4th bill = 13000 x 12% x 19/360 = Rs.82

4 Interest on Bill No.3 = 12000 x 12% x 3/12 = Rs.360

 

 

answered Feb 28, 2016 by jbsclasses (3,813 points)
Sir if the bill discouned with the bank is dishonoured then the entry won't be (this)

Suderson a/c Dr $5000

  To bank a/c $5000 .

But I can't understand the reason why you have passed it as

Bank a/c Dr $5000

  To suderson a/c $5000.  .

Will u please explain me sir
You are right, thanks for pointing out the error.  I have made the correction in the answer.
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