Mr. Kabir accepted a bill for 10,000 drawn on him by Mr. Samarveer on 1st August, 2024 for 3 months. This was for the amount which Kabir owed to…

CA Foundation · Accounting · RTP · September 2025
Mr. Kabir accepted a bill for 10,000 drawn on him by Mr. Samarveer on 1st August, 2024 for 3 months. This was for the amount which Kabir owed to Samarveer. On the same date Mr. Samarveer got the bill discounted at his bank for 9,800. On the due date, Kabir approached Samarveer for renewal of the bill. Mr. Kabir agreed on condition that - 2,000 be paid immediately along with interest on the remaining amount at 12% p.a. for 3 months and that for the remaining balance B should accept a new bill for 3 months. These arrangements were carried through. On 31st December, 2024, Kabir became insolvent and his estate paid 40%. Prepare Journal Entries in the books of Mr. Samarveer.

Suggested Answer and Working Notes:

Journal Entries in the Books of Mr. Samaveer Date Particulars L.F. Dr. Amount ₹ Cr. Amount ₹ 2024 August, 1 Bills Receivable A/c Dr. 10,000 To Kabir (Being the acceptance received from Kabir to settle his account) 10,000 August, 1 Bank A/c Dr. 9,800 Discount A/c Dr. 200 To Bills Receivable (Being the bill discounted for 9,800 from bank) 10,000 November, 4 Kabir Dr. 10,000 To Bank Account (Being the Kabir’s acceptance is to be renewed) 10,000 November, 4 Kabir Dr. 240 To Interest Account (Being the interest due from Kabir for3 months i.e.,8000x 3/12 ×12%= 240) 240 November, 4 Cash A/c Dr. 2,240 Bills Receivable A/c Dr. 8,000 To Kabir (Being amount and acceptance of new bill received from Kabir) 10,240 December, 31 Kabir A/c Dr. 8,000 To Bills Receivable A/c (Being Kabir became insolvent) 8,000 December, 31 Bank A/c Dr. 3,200 Bad debts A/c Dr. 4,800 To Kabir (Being the amount received and written off on Kabir’s insolvency) 8,000

Topics: Bills of Exchange and Promissory Notes

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