DK Goel Solutions Class 11 Accountancy Chapter 18 Bills of Exchange

Short Answer Questions

Question 1. Give a definition of Bill of Exchange and give its four characteristics.

Solution  1:

Definition of Bill of Exchange: As per Section 5 of the Negotiable Instruments Act, 1881, "A Bill of Exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."

Features or Characteristics of Bill of Exchange are:

1. Bill of exchange is a written order.
2. Bill of exchange is drawn and signed by the maker or drawer of the bill.
3. Bill of exchange is an unconditional order to a person or drawee, to pay the specified amount. The drawee must accept it to make it a valuable document.
4. The specified amount is payable to the person named in the bill or to his order or to the bearer.

Question 2. What are the parties to a bill of exchange?

Solution 2:

Parties to a bills of exchange:-

1.) Drawer:- He is the seller or creditor entitled to receive money from someone. He writes or draws the bill and is known as drawer.

2.) Drawee or Acceptor:- He is the purchaser or the debtor on whom the bill is drawn and who is liable to pay the amount mentioned in the bill. He accepts to pay the amount by writing the word “Accepted” on the bill and then sign it.

3.) Payee:- The person to whom the payment is to be made is called payee The drawer himself or a third party may be the payee of the bill.

Question 3. State any two advantages of bill of exchange.

Solution  3: Below are the advantages of bills of exchanges:-

1.) Helpful in the purchase and sale of goods on credit:- A bill of exchange serves as a written evidence of debt. It is a proof that the purchaser of goods owes the amount written in it. As such the goods can be sold on credit without difficulty.

2.) Legal Document:- It is a valid document in the eyes of law. If the drawee fails to make its payment, it would be easier to recover the amount legally in comparison to a verbal promise.

Question 4. What is the difference between a bill of exchange and a draft?

Solution 4: A bill of exchange is called a draft till its acceptance is made.

Question 5. Prepare an imaginary specimen of a bill of exchange.

Solution  5:

Question 6. Give a definition of Promissory Note and give its four characteristics.

Solution  6: Sometimes, the purchaser of the goods or debtor himself writes a note, signs it and gives it to the seller of the goods. It is called a ‘Promissory Note’.

Features of a Promissory Note:-

1.) It must be in writing.

2.) The amount to be paid must be specified.

3.) It must be signed by the maker or promisor.

4.) The name of the payee must be mentioned in it.

Question 7. What are the parties to a promissory note?

Solution 7:

Parties to a Promissory Note:-

1.) Maker:- He is the person who writes a promissory note and signs it.

2.) Payee:- He is the person who is entitled to get the payment.

Question 8. Prepare an imaginary specimen of a promissory note.

Solution 8:

Question 9. Give four differences between a Bill of Exchange and a Promissory Note.

Solution 9:

Question 10. Distinguish between Bills of Exchange and Promissory note on the following basis:

(a) Order or Promise and Parties (b) Acceptance (c) Parties (d) Noting

Solution 10:

Question 11. What are the different uses available to a holder for dealing with bills receivable?

Solution 11: Below are the uses of bills receivable:-

1.) He may keep it till the date of maturity.

2.) He may discount it will the banker before the date of maturity.

3.) He may endorse it to some other party before the date of maturity.

4.) He may send it to his banker for collection.

Question 12. What is meant by “Retiring a bill under rebate"?

Solution 12: When the drawee makes the payment of bill before its due date, it is called retiring the bill. In such case the holder of the bill usually allows him discount, technically called rebate.

Question 13.

Explain in brief the meaning of the following terms:

(i) Endorsement of a bill

(ii) Renewal of a bill

(iii) Dishonour of a Bill

(iv) Date of Maturity

Solution 13:

(i) Endorsement of a bill:- Endorsement means signing the bill of exchange for the purpose of transferring it to another. The holder of a bill receivable can endorse the bill to another person by putting his signature at the back of the bill.

(ii) Renewal of a bill:- The acceptor of a bill finds himself unable to meet the bill on the due date. In such case he may request the holder of the bill to cancel the original bill and draw a new bill in place of the old one.

(iii) Dishonour of a bill:- When the acceptor of the bill refuses to pay the amount of the bill on the date of maturity or becomes insolvent, it is called dishonour of the bill.

(iv) Date of Maturity:- The date on which the payment of the bill becomes due is called the ‘due date’ or ‘date of maturity’. In other words the date on which the duration of the bill comes to an end is called the due date.

Question 14. Explain any three of the following:

(i) Retiring of a bill of exchange

(ii) Discount of a bill of exchange

(iii) Bill sent to bank for collection

(iv) Noting Charges

Solution 14:

(i) Retiring of a bill of exchange:- When the drawee makes the payment of the bill before its due date, it is called retiring the bill. In such a case, the holder of the bill usually allows him discount, technically called ‘rebate’.

(ii) Discount of bill of exchange:- If the holder of a B/R needs money before the date of maturity, he can discount the bill from the bank in order to obtain cash for it. Discount means en-cashing the bill before the date of its maturity or borrowing from the bank on the security of the bill. 

(iii) Bill sent to bank for collection:- Sometime instead of Discount the bill, it is sent to the bank with the instructions to keep the bill till maturity and collect its amount from the acceptor on that date.

(iv) Noting Charge:- To establish the fact that the bill was properly presented and dishonoured, the bill is usually handed over to a person called ‘Noting Public’, appointed by the court.

Question 15. What Journal entries will be will be made by the drawer in his books, when :

(i) a Bill is drawn:

(ii) a Bill is discounted; and

(iii) a Bill is dishonoured and noting charges paid

Solution 15:

Question 16. What do you mean by dishonour of a bill? What entries will be made in the books of drawer, if:-

(i) Bill is with the drawer himself,

(ii) Bill is discounted with the Bank,

(iii) Bill is with the endorsee, and

(iv) Bill is sent to the Bank for collection.

Solution 16:

(i) Bill is with the drawer himself:-

(iii) Bill is with the endorsee: Endorsement means transfer of Bill of Exchange or Promissory Note to another person. The person receiving the Bill of Exchange or Promissory Note becomes authorised to receive the payment. The person who transfers the Bill of Exchange or Promissory Note in favour of other person is called endorser. The person to whom the Bill of Exchange or Promissory Note is endorsed is called endorsee.

(iv) Bill sent to bank for collection:- Sometime instead of Discount the bill, it is sent to the bank with the instructions to keep the bill till maturity and collect its amount from the acceptor on that date.

Question 17. What do you mean by ‘Accommodation Bill?

Solution 17: In order to oblige a friend, a bill may be accepted without consideration. Such a bill is known as “accommodation bill”.

Question 18. Distinguish between an accommodation bill and a trade bill.

Solution 18:

Class 11 Accounts Ch 18 Practical Problems Solutions

Question 1.   Calculate the due dates of the bills in the following cases:

             Date of the Bills                              Period

I.           1st February, 2017                       2 months

II.         31st January, 2017                       3 months

III.       30th September, 2017                 2 months

IV.        30th September, 2017                 3 months

V.         29th December, 2017                  2 months

VI.        31st December, 2017                  2 months

VII.      15th July, 2017                               30 days

VIII      27th January, 2016                       1 month

Solution 1

Point of Knowledge:-

Bills Due Date = Date of Bill Drawn + Period + Grace Days

Question 2. Find out the due dates of the bills in the following cases:

              Date of the Bills                                                        Period

I.           29th May, 2017                                                        4 months

II.          31st March, 2017                                                    1 month

III.        21st July, 2017                                                        60 days

IV.        14th May, 2017                                                         90 days

V.         28th January, 2016                                                   1 month

VI.        31st January, 2016                                                   1 month

              Emergency holiday 22nd September.              

Solution 2            

Point of Knowledge:-

Due Date of Bill = Date of Bill Drawn + Period + Grace Days

When due date falls on;
1. Public holiday (here October 2, 2017 and August 15, 2017), then due date is preceding date.
2. Emergency holiday (here September 22, 2017), then due date is succeeding date.

Question 3. On 1st January, 2019, Ajay sold goods to Bhushan for ₹ 50,000. Ajay draws a bill of exchange for two months for the amount due which Bhushan accepts and returns it to Ajay. Bhushan met the bill on the due date. Pass Journal entries in the books of Ajay and Bhushan.

Solution 3:

Question 4. On Jan. 1,2017, Tarun purchased goods from Arun for ₹ 20,000 and immediately drew a promissory note in favour of Arun payable after 1 month. Date of maturity of the promissory note was declared emergency holiday by the Government of India under the Negotiable Instrument Act 1881. Tarun met the promissory note according to the provisions of law. Pass the necessary Journal entries in the books of Arun and Tarun.

Solution 4:

Working Note:-

Here the due date is February 04, 2017 which is a holiday then the due date is 05 February, 2017

Point of Knowledge:-

If due date falls on holiday, then due date is succeeding date.

Question 5. On Feb. 6, 2017 A sold goods for ₹ 1,00,000 to B. B paid 40% immediately on which A allowed a cash discount of ₹ 500. For the balance A drew a bill on B payable after 30 days. Due date of bill was a public holiday and the bill was met as per the provisions of Negotiable Instrument Act. Journalise the above transactions in the books of A and B.

Solution 5:

Working Note:-

Here the due date is 11 March, 2017 which is a holiday then the due date is 10 March, 2017

Point of Knowledge:-

If due date falls on holiday, then due date is succeeding date. 

Question 6 (A) Vishal sold goods for ₹ 70,000 to Manju on Jan. 5, 2019 and drew upon her a bill of exchange payable after 2 months. Manju accepted Vishal's draft and handed over the same to Vishal after acceptance. Vishal immediately discounted the bill with his bank @ 12% p.a. On the due date Manju met her acceptance. Journalise the above transactions in the books of Vishal and Manju.

Solution 6:

Question 6 (B) On 15th February, 2019, X sold goods to Y for ₹ 60,000. On the same day, Y accepted a bill drawn upon him by X for three months for ₹ 60,000. X immediately discounted the bill at 15% p.a. at his bank and Y met the bill on maturity. Make Journal entries in the books of both the parties.

Solution 6 (B):

Question 7.   B owed ₹ 20,400 to A. On 15th January, 2019, he accepted a bill for ₹ 20,000 for two months drawn by A in full settlement of his debt. On 18th January, 2019, A endorsed the bill to his creditor C. The bill was duly met on the date of maturity. Pass Journal entries in the books of A, B and C.

Solution 7:

Question 8. On 10th January, 2017, A sells goods to B for ₹ 12,000. On that date, B accepted a bill drawn upon him by A at two months for ₹ 12,000. A retains the bill till due date and on due date sends the bill to the Banker for collection. In due course, A receives the information from the Bank that the bill has been duly met.
Pass Journal Entries in the books of A and B.

Solution 8:

Question 9. On Jan. 15, 2017, Kusum sold goods for ₹ 30,000 to Pushpa and drew upon her three bills of exchanges of ₹ 10,000 each payable after one month, two months and three months respectively. The first bill was retained by Kusum till its maturity. The second bill was endorsed by her in favour of her creditor Khushboo and the third bill was discounted by her immediately @ 6% p.a. All the bills were met by Pushpa. Journalise the above transactions in the books of Kusum and Pushpa.

Solution 9:

Question 10.X draws on Y a bill for ₹ 4,000 which was duly accepted by Y. Y meets the bill on its due date. Show what entries would be passed in the books of X and Y under each of the following circumstances:

(i) If X retains the bill till due date.

(ii) If X discounts the same with his banker paying ₹ 100 for discount.

(iii) If X endorses the same to his creditor Z, in full settlement of his debt of ₹ 4,080.

(iv) If X sends the bill to his banker for collection.

Solution 10:

Question 11.  X made the following sales to Y:

Date                                Amount (₹)

Jan. 01, 2017                20,000

Jan. 08, 2017                25,000

Jan. 10, 2017                10,000

Jan. 15, 2017                40,000

For all the sales X drew bills on Y payable after 60 days. Bill drawn on Jan. 01, 2017 was retained by X with him till its due date. The bill drawn on Jan. 08, 2017 was discounted by X from the bank at 9% p.a. The bill drawn on Jan. 10, 2017 was endorsed by X to his creditor Z in full settlement of ₹ 10,400. On March 12, 2017 X sent the bill drawn on Jan. 15, 2017 to his bank for collection. All the bills were met by Y on due dates. Pass necessary journal entries in the books of X and Y and prepare Y' s account in the books of X and X's account in the books of Y.

Solution 11:

Question 12. On January 1, 2017, Ajay sold goods to Balbir for ₹ 10,000 at a discount of 20%. On that date, Balbir accepted a bill, drawn on him by Ajay for ₹ 8,000 payable 3 months after sight. Having surplus funds, Balbir paid off the bill on 4th March, 2017 and was allowed a rebate of 18% per annum. Show Journal entries in the books of Ajay and Balbir.

Solution 12:

Question 13. On 17th April, 2016, X sold goods to Y for ₹ 80,000 and draws a bill for 2 months upon Y for the amount due. Y accepted the bill and returned it to X. On due date the bill became dishonoured and X paid ₹ 400 as Noting Charges. Fifteen days later Y pays the amount due to X. Pass Journal entries in the books of both the parties.

Solution 13:

Question 14 (A) On 1st April, 2016, B accepts a bill drawn by A at three months for ₹ 8,000 in payment of debt. On the due date the acceptance is dishonoured and A gets the bill noted paying ₹ 100. On 4th July, 2016 A draws a new bill payable after 73 days provided interest is paid in cash @ 15% p.a. To this B is agreeable. The bill is met on maturity.

Record these transactions in the Journal of both the parties.

Solution 14 (A)

Question 14 (B) On 15th October, 2016, Y purchased goods worth ₹ 75,000 from X, and accepted a three months bill for this amount drawn by X. On the due date, it was dishonoured. Noting charges paid by X ₹ 600. On 18th January, 2017, Y requested X for renewal of the bill for another two months, for which X agrees, provided that interest is paid @ 15% p.a. in cash. Make Journal entries of these transactions in the books of X and Y.

Solution 14 (B)

Question 15. On 1st January, 2018, Dinesh purchased goods from Chander for ₹ 60,000 plus CGST and SGST @ 6% each. Dinesh pays ₹ 7,200 in cash and accepts a bill drawn by Chander for the balance amount payable after two months. On the due date Dinesh is able to manage ₹ 20,000 in cash and he arranges with Chander for the retirement of the bill in consideration of this payment and a fresh bill at four months for the balance plus interest at 18% per annum. The second bill is duly met on maturity.
make the necessary Journal entries in the books of Chander and Dinesh.

Solution 15:

Question 16.A sells goods for ₹ 30,000 to B on 1st January, 2017 and on the same day draws a bill on B at three months for the amount. B accepts it and returns it to A, who discounts it on 4th February, 2017 with his bank at 18% per annum. The acceptance is dishonoured on the due date, the noting charges paid by the bank being ₹ 200.
On 4th April, 2017, B accepts a new bill at two months for the amount then due to A together with interest at 12 per cent per annum. Make Journal entries to record these transactions in the books of A and B.

Solution 16:

Question 17. On 21st Sept. 2017, Radhika sold goods for ₹ 2,00,000 to Parvati and drew upon later a bill for the same amount payable after 3 months. The bill was accepted by Parvati, Radhika discounted the bill from bank at a discount of 15% p.a. on 21st Oct., 2017. On maturity, the bill was dishonoured. Parvati agreed to pay ₹ 1,20,000 in cash including ₹ 3,000 interest and accepted a new bill for 3 months. The new bill was endorsed to Gayatri in full settlement of his account ₹ 85,000. It was duly met on maturity. Pass entries in the books of Radhika.

Solution 17:

Question 18. Asha sold goods worth ₹ 19,000 to Nisha on March 2, 2016. ₹ 4,000 were paid by Nisha immediately and for the balance she accepted a bill of exchange drawn upon her by Asha payable after three months. Asha discounted the bill immediately with her bank @ 10% p.a. On the due date Nisha dishonoured the bill and the bank paid ₹ 30 as noting charges. On 5th June, Nisha paid ₹ 3,030 (including noting charges) in cash and accepted a new bill at one month for the amount due to Asha together with interest @ 15% p.a. Record the necessary journal entries in the books of Asha and Nisha.

Solution 18:

Question 19. A sold goods for ₹ 40,000 to B on Jan. 01, 2017. He drew upon B a bill of exchange for the same amount payable after 1 month. B accepted the bill and sent it back to A. A discounted the bill immediately with his bank @ 9% p.a. On the due date B dishonoured the bill of exchange and the bank paid ₹ 200 as noting charges. B requested A to draw a new bill upon him with interest @ 12% p.a. which he agreed. The new bill was payable after 1 month. One week before the maturity of the second bill B requested A to cancel the second bill. He further requested to accept ₹ 15,000 in cash immediately and draw a third bill upon him including interest of ₹ 1,000. A agreed to B's request. The third bill was payable after one month. B met the third bill on its maturity. Record the necessary journal entries in the books of A and B and also prepare B's account in the books of A and A's account in the books of B.

Solution 19:

Question 20. Journalise the following transaction in the books of Rajni:
Geeta's acceptance of ₹ 20,000 which had been discounted with the bank for ₹ 19,500 has been returned by the Bank dishonoured. Noting charges paid by Bank ₹ 25.

Solution 20:

Question 21 (A) A Bill receivable for ₹ 10,000, which had been discounted for ₹ 9,700, is dishonoured and the Bank paid ₹ 20 as noting charges.
Pass entries in the books of drawer and drawee.

Solution 21 (A)

Question 21 (B). Journalise the following in the books of X:
Y's acceptance for ₹ 2,00,000 which was discounted by X from the bank has been dishonoured, noting charges paid by bank being ₹ 100.

Solution 21 (B)

Question 22. On 10th April, 2018, Ravi purchased from Mohan goods for ₹ 30,000 plus CGST and SGST @ 9% each. Ravi paid ₹ 15,400 in cash and accepted a bill for two months for the balance amount drawn on him by Mohan. Mohan endorsed the bill to Rakesh. The bill was dishonoured on the due date. Rakesh had to spend ₹ 100 as noting charges.
Immediately after the dishonour, Mohan accepted a new bill drawn by Rakesh, in which ₹ 200 for interest were also included. After 20 days of the dishonour of the bill, Ravi paid full amount of Mohan including ₹ 50 as interest. Show Journal entries in the books of Ravi, Mohan and Rakesh.

Solution 22:

Question 23. On March 4, 2017, A purchased from B goods for ₹ 50,000. A paid 40% immediately and for the balance gave a promissory note to B payable after 30 days. B immediately endorsed the promissory note in favour of his creditor C for the full settlement of a debt of ₹ 31,000. On the due date the bill was dishonoured and C paid ₹ 100 as noting charges. On the same date C informed B about the dishonour of the bill. B settled his debt to C by cheque for ₹ 30,100 which includes noting charges. A settled B's claim by cheque for the same amount.
Record the necessary journal entries in the books of A, B and C for the above transactions and prepare A's and C's accounts in the books of B, B's account in the books of A and also B's account in the books of C.

Solution 23:

Question 24. On Feb. 01, 2017, Mohan sold goods worth ₹ 25,000 to Naresh and drew upon him a bill payable after 90 days. Naresh accepted the bill and Mohan endorsed the bill immediately in favour of his creditor Raja in full settlement of his account of ₹ 25,300. One week before the maturity of the bill Naresh requested Mohan to cancel the bill and draw upon him a new bill including interest of ₹ 400. Mohan agreed to it. Mohan immediately took the bill from Raja by making the payment to him and then drew upon Naresh a new bill for 30 days which was duly met by Naresh on due date.
Pass necessary entries in the books of Mohan.

Solution 24:

Question 25.A purchased goods for ₹ 15,000 from B on March 01, 2017 and accepted a bill of exchange drawn by B for the same amount. The bill was payable after 60 days. On April 28, B sent the bill to his bank for collection. The bill was duly presented by the bank. A dishonoured the bill and the bank paid ₹ 150 as noting charges.
Record the necessary journal entries for the above transactions in the books of A and B.

Solution 25:

Question 26. Vimal purchased goods ₹ 25,000 from Kamal on Jan. 15, 2017 and accepted a bill of exchange drawn upon him by Kamal payable after two months. On the date of the maturity the bill was duly presented for payment. Vimal dishonoured the bill.
Record the necessary journal entries in the books of Kamal and Vimal when :
(i) The bill was retained by Kamal till the date of its maturity.
(ii) The bill was immediately discounted by Kamal with is bank @ 6% p.a.
(iii) The bill was endorsed by Kamal in favour of his creditor Sharad.
(iv) Five days before its maturity the bill was sent by Kamal to his bank for collection.

Solution 26:

Question 27. X draws upon Y a bill of ₹ 10,000 for three months on 1st July, 2016. The bill was duly accepted and returned by Y. On due date bill became dishonoured and noting charges paid under each of the following circumstances ₹ 75. Pass entries in the following cases:
(i) If drawer retains the bill with him till due date.
(ii) If drawer discounts the same with his Banker and noting charges paid by the Banker.
(iii) If drawer endorses the same to his creditor Z and noting charges paid by Z.
(iv) If drawer sends the bill for collection to his Banker and noting charges paid by the Banker.

Solution 27:

Question 28. What Journal entry will be passed in the books of drawer (X) and drawee (Y) at the time of dishonour of bill in the following cases:
(i) If bill of ₹ 50,000 was discounted from bank and noting charges paid by the bank was ₹ 600.
(ii) If B/R of ₹ 50,000 was endorsed in favour of Z. Noting charges paid by Z ₹ 600.
(iii) If B/R is returned with drawer and noting charges were ₹ 600.

Solution 28:

Question 29.A sold goods to B for ₹ 60,000 Charging IGST @18% and immediately drew a bill on B who duly accepted the same. A endorsed the bill to C. C endorsed it to his creditor D. D discounted the bill for ₹ 68,000. On the date of maturity, the bill was dishonoured and Bank paid noting charges amounting to ₹ 200.
Show Journal entries in the books of all the parties to record these transactions.

Solution 29:

Question 30. On 1st Jan., 2016, Satish drew on Harish three bills of exchange in full settlement of claims, the first for ₹ 14,000 at one month; the second for ₹ 16,000 at two months and the third for ₹ 18,000 at three months. The bills were duly accepted by Harish. The first bill was endorsed by Satish to his creditor Rajnish on 3rd Jan., 2016.
The second bill was discounted on 15th Jan. for ₹ 15,900 and the third bill was sent to bank for collection on 4th Feb. All the bills were met on maturity except the second bill which was dishonoured, noting charges being paid ₹ 240. Satish charged ₹ 300 for interest from Harish and drew on him a fourth bill for two months for ₹ 16,540. The fourth bill was duly met on maturity.
Give Journal entries in the books of Satish and Harish.

Solution 30:

Question 31. On 1st January, 2010, Arun purchased from Barun goods invoiced at ₹ 10,000. On the same date, Barun drew upon Arun a bill for the amount at 2 months and Arun accepted the same. On 4th January, 2010, Barun got the bill discounted with his bank @12% per annum. On due date, Arun told Barun that he was not in a position to pay the full amount and requested Barun to accept ₹ 5,000 in cash and draw a fresh bill at 2 months for the remaining amount plus interest at 15% per annum, Barun agreed. The second bill was duly met on the due date.
Give journal entries to record the above transactions in the books of Barun.

Solution 31:

Question 32. Darshan sold goods for ₹ 40,000 to Varun on 8.1.2017 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date the bill was met by Varun. Record the necessary Journal entries in the books of Darshan and Varun in the following circumstances:

When the bill was retained by Darshan till the date of its maturity.

When Darshan immediately discounted the bill @6% p.a. with his bank.

When the bill was endorsed immediately by Darshan in favour of his creditor Suresh.

When three days before its maturity, the bill was sent by Darshan to his bank for collection.

Solution 32:

Question 33. On Jan. 1, 2017 Neha sold goods for ₹ 20,000 to Muskan and drew upon her a bill of exchange payable after two months. One month before the maturity of the bill Muskan approached Neha to accept the payment against the bill at a rebate @12% p.a. Neha agreed to the request of Muskan and Muskan retired the bill under the agreed rate of rebate.
Journalise the above transactions in the books of Neha and Muskan.

Solution 33:

Question 34. Leena sold goods to Meena on March 01, 2009 for ₹ 68,000 and drew two bills of exchange of the equal amount upon Meena payable after three months. Leena immediately discounted the first bill with her bank at 12% p.a. The bill was dishonoured by Meena and Bank paid ₹ 55 as noting charges. The second bill was retired on May 04, 2009 under a rebate of 6% p.a. with mutual agreement. Journalise the above in the books of Leena and Meena.

Solution 34:

Question 35. Anita purchased goods for ₹ 23,000 from Kavita on October 15, 2009 and accepted a bill of exchange drawn upon her by Kavita payable after two months. On the date of maturity the bill was duly presented for payment. Anita dishonoured the bill. The payee noted with ₹ 95 as noting charges.
Record the necessary journal entries in the books of Kavita and Anita, when (a) The bill was immediately discounted by Kavita with her Bank @ 9% p.a. (b) The bill was endorsed by Kavita in favour of her creditor Shankar after one month.

Solution 35:

Question 36. Abdulla sold goods to Tahir on Jan. 17, 2017 for ₹ 18,000. He drew a bill of exchange for the same amount on Tahir for 45 days. On the same date Tahir accepted the bill and returned it to Abdulla. On the due date Abdulla presented the bill to Tahir which was dishonoured. Abdulla paid ₹ 40 as noting charges. Five days after the dishonour of his acceptance Tahir settled his debt by making a payment of ₹ 18,700 including interest and noting charges.
Record the necessary journal entries in the books of Abdulla and Tahir. Also prepare Tahir's account in the books of Abdulla and Abdulla's account in the books of Tahir.

Solution 36:

Question 37. X sold goods to Y on 1.3.2017 for ₹ 12,000 and drew upon Y a bill of exchange for the same amount payable after two months. X immediately discounted the bill with his bank at 9% p.a. The maturity date of the bill was a non business day (holiday), therefore, X had to present the bill as per the provisions of the Indian Instruments Act, 1881. The bill was dishonoured by Y and X paid ₹ 45 as noting charges. Y settled the claim of X five days after the dishonour of the bill by a cheque which included interest @ 12% for the term of the bill.
Journalise the above transactions in the books of X and Y and prepare Y's account in the books of X and X's account in the books of Y.

Solution 37:

Point of Knowledge:-

Here the due date is May 04, 2017 which is a holiday then the due date is 03 May, 2017. If due date falls on Public holiday, then due date is preceding date.

Question 38. On 1st February 2018, A sold goods to B for ₹ 40,000 Charging CGST and SGST @ 9% each. B pays ₹ 17,200 in cash and accepted a three months bill for the balance. On the due date, B expressed his inability to meet the bill and offered ₹ 12,000 in cash and to accept a new bill for one month for the balance plus interest at 18% p.a. A agrees to the proposal. On the due date the bill was duly honoured by B. Pass entries in the books of A and B.

Solution 38:

Question 39. On 15th January 2018, X sold goods to Y for ₹ 50,000 charging IGST @ 12%. Y immediately paid ₹ 6,000 in cash and accepted two bills of equal amount, the first for one month and the second for two months. The first bill was met on due date but on the due date of the second bill, Y requested that the bill be renewed for a further period of two months. X agreed provided that interest at 15% p.a. was paid immediately in cash. Y agreed to this. The second bill was met on the due date.
Give journal entries in the books of X and Y.

Solution 39:

Question 40. On 1st January 2017, Amar sold goods to Akbar for ₹ 60,000. Akbar accepts two bills of ₹ 25,000 for 2 months, and ₹ 35,000 for 3 months.
The first bill was discounted from bank on 3rd January 2017 for ₹ 24,900 and 2nd bill endorsed to Anthony on 15th January 2017.
First bill was met on maturity but second bill got dishonoured and noting charges of ₹ 200 being paid. Amar charged ₹ 300 as Interest and drew another bill for the amount due for further 2 months. This bill was met on maturity.
Pass the necessary Journal Entries in the books of Amar, Akbar and Anthony.

Solution 40:

Question 41. Manohar drew a bill of exchange on Pushkar, his debtor, for ₹ 20,000 on 1st March 2016 for 3 months. Pushkar accepted the same and returned it to the drawer. Manohar endorsed the bill to Yadu on 1st April 2016 for a debt of equal amount. Yadu discounted it with the bank at 15% p.a. on 1st May 2016. On the due date the bill was dishonoured. (Noting charges amounted to ₹ 100). Show the journal entries in the books of :

(a) Drawer, (b) Drawee/Acceptor, and (c) Endorsee

Solution 41:

Q42. On 1st January 2017, Hari drew on Gopal, who is his debtor for ₹ 60,000 three bills of exchange: First for ₹ 15,000 at one month, Second for ₹ 20,000 at two months and third for ₹ 25,000 at three months. Gopal accepted all the three bills.

On 5th January 2017, Hari endorsed the first bill to his creditor Satish in full settlement of his account of ₹ 15,200. This bill was duly met on maturity.

On 1st February 2017, the second bill was discounted from the bank @ 12% p.a. This bill was dishonoured on the due date and bank paid ₹ 120 as noting charges. On Gopal's request, Hari drew a fourth bill on Gopal for 2 months for the amount due plus interest @ 15% p.a.

Third bill was paid under a rebate of 12% p.a. one month before maturity. The fourth bill was sent to bank for collection on 4th May 2017 and was duly met on maturity.
Pass Journal entries in the books of Hari, Gopal and Satish.

Solution 42:

Question 43. Harpal sold goods to Sompal for ₹ 12,000. Sompal accepted three bills of exchange, the first for ₹ 5,000 at one month, the second for ₹ 4,000 at two months and the third for ₹ 3,000 at three months. Harpal endorsed the first bill to Rajpal. The first bill was dishonoured. Rajpal paid ₹ 30 as noting charges. Harpal charged ₹ 200 for interest and drew on Sompal a fourth bill for ₹ 5,230. The second bill was also dishonoured, noting charges paid being ₹ 25. Harpal charged ₹ 150 as interest and accepted ₹ 2,175 in cash and drew a fifth bill for ₹ 2,000. The bill was paid on due date. The third and fourth bills were also met.
Pass Journal entries in the books of Harpal and prepare Sompal's Account in Harpal's Ledger.

Solution 43:

Question 44 (A). Journalise the following in the books of Hari.
Sohan informs Hari that Mohan's acceptance for ₹ 13,000, endorsed in favour of Sohan by Hari, has been dishonoured. Sohan agrees to accept ₹ 3,000 in cash and an acceptance at 3 months together with interest @ 12% per annum.

Solution 44 (A)

Question 44 (B) Journalise the following in the books of Harish.
Harish sends Hari's acceptance for ₹ 26,000 to Babu to meet his acceptance for the like amount in favour of Babu.

Solution 44 (B):

Question 45 Journalise the following transactions in our books:
(a) Our acceptance to Karan for ₹ 4,500 renewed for 3 months on the condition that ₹ 2,500 is paid in cash immediately and a new bill to be drawn including interest @ 12% p.a.
(b) A bill payable accepted in favour of Hari for ₹ 4,000 returned unpaid due to lack of instructions to the bank. Hari claims ₹ 4,050. (₹ 50 as noting charges), which is paid by cheque.

Solution 45:

Question 46. Mehak sold goods for ₹ 24,000 to Shally on July 31, 2017 and drew three bills for ₹ 6,000, ₹ 8,000 and ₹ 10,000 payable after two, three and four months respectively. The first bill was kept by Mehak with her till maturity date. She endorsed the second bill in favour of her creditor Kanak. The third bill was discounted on September 3, 2017 @ 12% p.a. from bank. The first and second bill were duly met on maturity but the third bill was dishonoured and the bank paid ₹ 150 as noting charges. On December 3, 2017 Shally paid ₹ 5,000 and noting charges in cash and accepted a new bill at two months after date for the balance amount plus interest ₹ 200. The new bill was met on maturity by Shally. You are required to give the Journal Entries in the books of Mehak.

Solution 46: