P owed - 2,00,000 to Q. On 1 st October, 2024, P accepted a bill drawn by Q for the due amount for 3 months. Q got the bill discounted with his bank…

CA Foundation · Accounting · PYQS · September 2025
P owed - 2,00,000 to Q. On 1 st October, 2024, P accepted a bill drawn by Q for the due amount for 3 months. Q got the bill discounted with his bank for 1,98,000 on 3 rd October, 2024. On 31 st December, 2024, before the due date, P approached Q for renewal of the bill. Q agreed on the conditions that - 1,00,000 along with interest at 12% per annum for 3 months on the amount of 1,00,000/- will be paid and P would accept a new bill for three months for the balance amount. These arrangements were carried out on 2 nd January, 2025. However, on 2 nd April, 2025, before the due date, P became insolvent and only40% of the amount of the bill could be recovered from his estate. Pass the necessary journal entries (with narration) in the books of Q.

Suggested Answer and Working Notes:

In the books of Q Journal Entries Particulars Dr. (₹) Cr. (₹) 1.10.24 Bills Receivable A/c Dr. 2,00,000 To P 2,00,000 (Being a3 month’s bill drawn on P for the amount due) 3.10.24 Bank A/c Dr. 1,98,000 Discount A/c Dr. 2,000 To Bills Receivable A/c 2,00,000 (Being the bill discounted) 31.12.24 P Dr. 2,00,000 To Bank A/c 2,00,000 (Being the bill cancelled up due to P’s inability to pay it) 2.1.25 P Dr. 3,000 To Interest A/c 3,000 (Being the interest due on 1,00,000 @12% for3 months) 2.1.25 Bank A/c Dr. 1,03,000 To P 1,03,000 (Being the receipt of a portion of the amount due on the bill together with interest) 2-1-25 Bills Receivable A/c Dr. 1,00,000 To P 1,00,000 (Being the new bill drawn for the balance) 2-4-25 P Dr. 1,00,000 To Bills Receivable A/c 1,00,000 (Being the dishonour of the bill due to P’s insolvency) 2-4-25 Bank A/c Dr. 40,000 Bad Debts A/c Dr. 60,000 To P 1,00,000 (Being the receipt of40% of the amount due on the bill from P’s estate)

Topics: Bank Reconciliation Statement, Bills of Exchange and Promissory Notes

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic