On 1st January, 2025, Tamal draws three bills of exchange for 16,000,25,000 and - 10,000. The first bill of exchange for 16,000 is for two months…

CA Foundation · Accounting · RTP · May 2026
On 1st January, 2025, Tamal draws three bills of exchange for 16,000,25,000 and - 10,000. The first bill of exchange for 16,000 is for two months while the second and third bill of exchange for 25,000 and - 10,000 is for three months. These bills are accepted by Tapas. On 4th March, 2025, Tapas requests Tamal to renew the first bill with interest at 15% p.a. for a period of two months. Tamal agreed to this proposal. On 25th March, 2025, Tapas retires the acceptance for the second bill of 25,000, the interest rebate i.e. discount being 250and the third bill of 10,000, the interest rebate i.e. discount being - 500. Before the due date of the renewed bill, Tapas becomes insolvent and only30paisa in a rupee could be recovered from his estate. Show the Journal Entries in the books of Tamal.

Suggested Answer and Working Notes:

Journal Entries in the books of Tamal 2025 Particulars Dr (₹) Cr. (₹) Jan.1 Bills receivable (No.1) A/c Dr. 16,000 Bills receivable (No.2) A/c Dr. 25,000 Bills receivable (No.3) A/c Dr. 10,000 To Tapas A/c 51,000 (Being drawing of bills receivable No.1 due for maturity on 4.3.2025 and bills receivable No.2 and3due for maturity on 4.4.2025) March, 4 Tapas’s A/c Dr. 16,000 To Bills receivable (No.1) A/c 16,000 (Being the reversal entry for bill No.1 on renewal) March, 4 Bills receivable (No.4) A/c Dr. 16,400 To Interest A/c 400 To Tapas’s A/c 16,000 (Being the drawing of bill of exchange no.4 due for maturity on 7.5.2025 together with interest at 15%p.a. in lieu of the original acceptance of Tapas) March, 25 Bank A/c Dr. 34,250 Discount A/c Dr. 750 To Bills receivable (No.2) A/c 25,000 To Bills receivable (No.3) A/c 10,000 (Being the amount received on retirement of bills No.2 and bills No.3 before the due date) May, 7 Tapas’s A/c Dr. 16,400 To Bills receivable (No.4) A/c 16,400 (Being the amount due from Tapas on dishonour of his acceptance on presentation on the due date) May, 7 Bank A/c Dr. 4,920 To Tapas’s A/c 4,920 (Being the amount received from official assignee of Tapas at 30 paise per rupee against dishonoured bill) May, 7 Bad debts A/c Dr. 11,480 To Tapas’s A/c 11,480 (Being the balance70% debt in Tapas’s Account arising out of dishonoured bill written off as bad debts)

Topics: Bills of Exchange and Promissory Notes

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