Mr. B accepted a bill for 10,000 drawn on him by Mr. A on 1st August, 2017 for 3 months. This was for the amount which B owed to A. On the same date…

CA Foundation · Accounting · MTP · June 2024
Mr. B accepted a bill for 10,000 drawn on him by Mr. A on 1st August, 2017 for 3 months. This was for the amount which B owed to A. On the same date Mr. A got the bill discounted at his bank for 9,800. On the due date, B approached A for renewal of the bill. Mr. A 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, 2017, B became insolvent and his estate paid 40%. Prepare Journal Entries in the books of Mr. A

Suggested Answer and Working Notes:

Journal Entries in the Books of Mr. A Date Particulars L.F. Dr. Amount ₹ Cr. Amount ₹ 2017 August, 1 Bills Receivable A/c Dr. To B (Being the acceptance received from B to settle his account) 10,000 10,000 August, 1 Bank A/c Dr. Discount A/c Dr. To Bills Receivable (Being the bill discounted for 9,800 from bank) 9,800 200 10,000 November, 4 B Dr. To Bank Account (Being the B’s acceptance is to be renewed) 10,000 10,000 November, 4 B Dr. To Interest Account (Being the interest due from B for3 months i.e.,8000x 3/12 ×12%= 240) 240 240 November, 4 Cash A/c Dr. Bills Receivable A/c Dr. To B (Being amount and acceptance of new bill received from B) 2,240 8,000 10,240 December, 31 B A/c Dr. To Bills Receivable A/c (Being B became insolvent) 8,000 8,000 December, 31 Cash A/c Dr. Bad debts A/c Dr. To B (Being the amount received and written off on B’s insolvency) 3,200 4,800 8,000

Topics: Death of a Partner

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

Related Questions in this Topic