Aadya owed - 1,00,000 to Aanya. On 1 st October, 2023, Aadya accepted a bill drawn by Aanya for the amount at 3 months. Aanya got the bill…
CA Foundation · Accounting · RTP · September 2024
Aadya owed - 1,00,000 to Aanya. On 1 st October, 2023, Aadya accepted a bill drawn by Aanya for the amount at 3 months. Aanya got the bill discounted with his bank for 99,000 on 3 rd October, 2023. Before the due date, Aadya approached Aanya for renewal of the bill. Aanya agreed on the conditions that - 50,000 be paid immediately together with interest on the remaining amount at 12% per annum for 3 months and for the balance, Aadya should accept a new bill at three months. These arrangements were carried out. But afterwards, Aadya became insolvent and 40% of the amount could be recovered from his estate. Pass journal entries (with narration) in the books of Aanya (ignore dates).
Suggested Answer and Working Notes:
In the books of Aanya Journal Entries Particulars L.F. Dr. ₹ Cr. ₹ Bills Receivable A/c Dr. 1,00,000 To Aadya A/c 1,00,000 (Being a3 month’s bill drawn on Aadya for the amount due) Bank A/c Dr. 99,000 Discount A/c Dr. 1,000 To Bills Receivable A/c 1,00,000 (Being the bill discounted) Aadya A/c Dr. 1,00,000 To Bank A/c 1,00,000 (Being the bill cancelled up due to Aadya’s inability to pay it) Aadya A/c Dr. 1,500 To Interest A/c 1,500 (Being the interest due on 50,000 @12% for3 months) Bank A/c Dr. 51,500 To Aadya A/c 51,500 (Being the receipt of a portion of the amount due on the bill together with interest) Bills Receivable A/c Dr. 50,000 To Aadya A/c 50,000 (Being the new bill drawn for the balance) Aadya A/c Dr. 50,000 To Bills Receivable A/c 50,000 (Being the dishonour of the bill due to Aadya’s insolvency) Bank A/c Dr. 20,000 Bad Debts A/c Dr. 30,000 To Aadya A/c 50,000 (Being the receipt of40% of the amount due on the bill from Aadya’s estate)
Topics: Bills of Exchange and Promissory Notes
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