Bills of Exchange: Practical Problems 🧮
Let's solve a comprehensive problem covering Drawing, Discounting, Dishonour, and Noting Charges.
Problem 1 📝
On 1st Jan 2024, A sold goods to B for ₹10,000. A drew a bill on B for 3 months. B accepted. On 4th Feb, A discounted the bill with his bank @ 12% p.a. On due date, the bill was dishonoured and Noting Charges paid by bank were ₹100.
Pass Journal Entries in the books of A (Drawer).
Solution (In Books of A)
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Jan 1 | B A/c ...Dr. | 10,000 | ||
| To Sales A/c | 10,000 | |||
| (Being goods sold) | ||||
| Jan 1 | Bills Receivable A/c ...Dr. | 10,000 | ||
| To B A/c | 10,000 | |||
| (Being acceptance received) | ||||
| Feb 4 | Bank A/c ...Dr. (10,000 - 200) | 9,800 | ||
| Discount Charges A/c ...Dr. | 200 | |||
| To Bills Receivable A/c | 10,000 | |||
| (Being bill discounted for 2 months @ 12%) | ||||
| Apr 4 | B A/c ...Dr. (10,000 + 100) | 10,100 | ||
| To Bank A/c | 10,100 | |||
| (Being bill dishonoured and noting charges charged) |
Bill discounted on Feb 4. Due date is Apr 4. Time remaining = 2 Months (Feb, Mar). Interest = 10,000 × 12/100 × 2/12 = ₹200.
Problem 2 (Renewal) 📝
Continuing from above... On 4th April, B requested A to renew the bill for 2 months. A agreed provided B pays ₹100 Noting Charges in Cash immediately and accepts a new bill for the balance plus Interest of ₹200.
Solution (In Books of A)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| Apr 4 | Cash A/c ...Dr. | 100 | |
| To B A/c | 100 | ||
| (Being noting charges received in cash) | |||
| Apr 4 | B A/c ...Dr. | 200 | |
| To Interest A/c | 200 | ||
| (Being interest due) | |||
| Apr 4 | New Bills Receivable A/c ...Dr. | 10,200 | |
| To B A/c | 10,200 | ||
| (Being new bill drawn for 10,000 + 200) |
🎉 UNIT I COMPLETE! You have mastered Bills of Exchange. From Drawing to Dishonour to Renewal.
Next epic: Unit II: Consignment Accounts - Sending goods to an agent! 📦