Maharashtra Board Class 12 Commerce BK Chapter 7 Bills of Exchange Solutions

Class 12 Commerce Bk Chapter 7 Exercise Solutions

Objective Questions

A. Select The Correct Option And Rewrite The Sentence:

Question 1.The person on whom a bill is drawn is called a _____
(a) Drawee
(b) Payee
(c) Drawer
(d) Acceptor
Answer: (a) Drawee
In simple words: A drawee is the individual or entity who is instructed by the drawer to make the payment on a bill of exchange.

🎯 Exam Tip: This question tests basic terminology in Bills of Exchange. Correctly identifying the parties involved is crucial.

Question 2.Before acceptance the bill is called a _____
(a) Order
(b) Request
(c) Draft
(d) Instrument
Answer: (c) Draft
In simple words: Before the drawee formally agrees to pay the bill by signing it, the document is referred to as a draft.

🎯 Exam Tip: Understanding the stages of a bill of exchange, especially pre-acceptance, is fundamental for theory questions.

Question 3.When the due date of the bill drawn falls due on a public holiday, the payment must be made on the _____ day.
(a) same
(b) preceding
(c) next
(d) any
Answer: (b) preceding
In simple words: If the calculated legal due date of a bill happens to be a public holiday, the payment must be made on the immediately preceding business day.

🎯 Exam Tip: Remember the rules for calculating the due date, especially concerning holidays, as it's a common area for questions.

Question 4.The due date of the bill drawn for 2 months on 23rd Nov. 2019 will be
(a) 23rd Jan. 2020
(b) 25th Jan. 2019
(c) 26th Jan. 2019
(d) 25th Jan. 2020
Answer: (d) 25th Jan. 2020
In simple words: To find the due date, add 2 months to November 23, 2019 (which brings it to January 23, 2020), then add the standard three grace days.

🎯 Exam Tip: Pay close attention to the starting date, period, and remember to add grace days for accurate due date calculation.

Question 5.Noting charges are borne by _____
(a) Notary Public
(b) Drawee
(c) Drawer
(d) Endorsee
Answer: (b) Drawee
In simple words: Noting charges, which are fees to legally record the dishonour of a bill, are ultimately paid by the drawee because their failure to pay caused the dishonour.

🎯 Exam Tip: Clearly distinguish between who *pays* the noting charges initially and who *ultimately bears* them.

Question 6.There are _____ parties to bill of exchange.
(a) five
(b) four
(c) three
(d) two
Answer: (c) three
In simple words: A bill of exchange fundamentally involves three main parties: the drawer (who creates it), the drawee (who pays it), and the payee (who receives the payment).

🎯 Exam Tip: Know the roles and responsibilities of each of the three parties in a bill of exchange.

Question 7.When a bill is drawn for 2 months after date on 3rd Jan. 2020, its due date will be _____
(a) 3rd Jan. 2020
(b) 3rd Mar. 2020
(c) 5th Mar. 2020
(d) 6th Mar. 2020
Answer: (d) 6th Mar. 2020
In simple words: Calculating two months from January 3, 2020, leads to March 3, 2020, and then adding the statutory three grace days yields March 6, 2020, as the legal due date.

🎯 Exam Tip: Accurately calculating the due date is critical; ensure you add the three standard grace days unless otherwise specified (e.g., "on demand" bills).

Question 8.Notary Public is _____
(a) Govt. Officer
(b) Drawer
(c) Payee
(d) Endorsee
Answer: (a) Govt. Officer
In simple words: A Notary Public is a government-appointed official authorized to perform specific legal acts, such as formally certifying documents like the dishonour of a bill.

🎯 Exam Tip: Understand the specific role of a Notary Public in the context of bills of exchange, particularly regarding dishonour.

Question 9.When Acceptor or Drawee does not pay the amount of bill to the holder on the due date it is known as _____ the bill.
(a) returning
(b) discounting
(c) honouring
(d) dishonouring
Answer: (d) dishonouring
In simple words: Dishonouring a bill occurs when the drawee or acceptor fails to make the required payment to the holder on its designated due date.

🎯 Exam Tip: Distinguish between "honouring" (payment) and "dishonouring" (non-payment) of a bill.

Question 10.The person who accepts the bill treats the bill as _____
(a) Bills Payable
(b) Promissory Note
(c) Draft
(d) Bills Receivable
Answer: (a) Bills Payable
In simple words: From the perspective of the acceptor (drawee), the bill represents a short-term liability or an obligation to pay a certain sum in the future, thus recorded as Bills Payable.

🎯 Exam Tip: Differentiate between Bills Receivable (asset for the holder/drawer) and Bills Payable (liability for the acceptor/drawee).

B. Write The Word/Phrase/Term, Which Can Substitute Each Of The Following Statements:

Question 1.Three extra days are allowed over and above the term of the bill.
Answer: Grace days
In simple words: These are the additional three days legally permitted for payment beyond the nominal maturity date of a bill of exchange.

🎯 Exam Tip: Always remember to account for grace days when calculating the legal due date of a bill, unless it's a "bill on demand."

Question 2.Fees charged by Notary Public for getting the fact of dishonour noted.
Answer: Noting Charges
In simple words: These are the official fees paid to a Notary Public for formally recording the non-payment or non-acceptance of a bill of exchange.

🎯 Exam Tip: Noting charges are initially paid by the holder but are ultimately recoverable from the party responsible for the dishonour, usually the drawee.

Question 3.A person who is entitled to receive the amount of bill of exchange.
Answer: Payee
In simple words: The payee is the individual or entity specified in the bill who is authorized to collect the payment when the bill matures.

🎯 Exam Tip: Clearly identify the roles of the drawer, drawee, and payee, as they are central to understanding bills of exchange.

Question 4.A person in whose favour a bill endorsed.
Answer: Endorsee
In simple words: An endorsee is the person to whom the ownership and rights of a bill of exchange are transferred through an endorsement.

🎯 Exam Tip: Understand the process of endorsement and how it transfers ownership and rights of a bill from the endorser to the endorsee.

Question 5.Officer appointed by the government for noting of dishonour of bill.
Answer: Notary Public
In simple words: A Notary Public is an authorized public officer whose duty includes formally recording and certifying the dishonour of a bill of exchange.

🎯 Exam Tip: The Notary Public's certification provides legal evidence that a bill was presented for payment and subsequently dishonoured.

Question 6.Cancellation of the bill on maturity in return for a new bill for an extended period of credit.
Answer: Renewal of Bill
In simple words: Renewal of a bill occurs when the drawee cannot pay on time and requests the drawer to cancel the old bill and draw a new one with a later due date.

🎯 Exam Tip: Renewal of a bill typically involves payment of interest by the drawee for the extended credit period.

Question 7.Bill of exchange drawn and accepted without any valuable consideration.
Answer: Accommodation bill
In simple words: An accommodation bill is created solely to provide financial assistance to one or both parties, lacking any underlying trade transaction or debt.

🎯 Exam Tip: Accommodation bills are exceptions to the general rule that bills of exchange arise from trade transactions.

Question 8.A person who is in possession of the Bill of Exchange.
Answer: Holder
In simple words: The holder is any person who is legally in possession of a bill of exchange and is entitled to receive its payment.

🎯 Exam Tip: The holder can be the original drawer, an endorsee, or a bank to whom the bill was discounted or sent for collection.

Question 9.Conversion of Bill of Exchange into its present value.
Answer: Discounting of the bill
In simple words: Discounting is the process of selling a bill of exchange to a bank before its maturity date to obtain immediate cash, minus a discount fee.

🎯 Exam Tip: The discount amount is essentially the bank's charge for providing early payment.

Question 10.The amount is not recoverable from Drawee on account of insolvency.
Answer: Bad debts
In simple words: Bad debts refer to the portion of an amount due on a bill that cannot be recovered from the drawee because they have become insolvent.

🎯 Exam Tip: Bad debts represent a financial loss for the business and affect profitability.

C. State Whether The Following Statements Are True Or False With Reasons:

Question 1.An Inland bill is one that is drawn in one country and payable in another country.
Answer: This statement is False.
Inland bill means, a bill drawn, accepted, and made payable within the territory of one and same, country. So, a bill is drawn in one country and payable in another country can't be an an inland bill.
In simple words: An inland bill is defined as a bill that originates, is accepted, and is payable all within the geographical boundaries of the same country.

🎯 Exam Tip: Clearly understand the geographical criteria that define an inland bill versus a foreign bill.

Question 2.Retirement of the bill means payment of the bill before the due date.
Answer: This statement is True.
Payment of the bill, by the acceptor of the bill to the holder of the bill before the due date, is known as Retirement of the bill. So retirement of the bill means payment of the bill before the due date.
In simple words: To retire a bill means the drawee or acceptor pays the amount due to the holder earlier than its actual maturity date.

🎯 Exam Tip: Retirement of a bill often entitles the drawee to a rebate or discount for early payment.

Question 3.Drawee can transfer the ownership of the bill.
Answer: This statement is False.
Drawee is a debtor. He has to pay the amount of the bill to its holder on the due date. Hence he cannot transfer its ownership to other people. The drawer can transfer the ownership of the bill as he is the owner of the bill.
In simple words: The drawee is obligated to pay the bill and does not have the right to transfer its ownership; only the drawer or current holder can transfer it.

🎯 Exam Tip: Remember that the drawee is the payer, not the owner who can transfer the bill's rights.

Question 4.Acceptance of the bill without making any changes in the terms of the bill is called qualified acceptance.
Answer: This statement is False.
Acceptance of the bill with some changes as regards the terms, amount, place, etc. of a bill is known as qualified acceptance. Acceptance of the bill without making changes as regards the term is called general acceptance.
In simple words: When a drawee accepts a bill without any modifications to its original conditions, this is termed as general acceptance, not qualified acceptance.

🎯 Exam Tip: Differentiate between "general acceptance" (unconditional) and "qualified acceptance" (conditional or with changes).

Question 5.Discounting is a device to convert the bill into its present value.
Answer: This statement is True.
When the drawer or holder of the bill approaches the bank to discount the bill, the bank pays the bill amount after deducting a certain amount (which is known as discounting charges). It means conversion of the bill into its present value in cash. So, we can say that discounting is a device to convert the bill into its present value.
In simple words: Discounting allows the holder to exchange a future payment right for immediate cash, effectively converting the bill's value from a future amount to a lesser present amount.

🎯 Exam Tip: Discounting provides immediate liquidity but comes at the cost of the discounting charges.

Question 6.A bill of exchange must be presented to the acceptor on the due date.
Answer: This statement is True.
To get the payment of the bill from the acceptor, the holder of the bill is required to present it to the acceptor on its due date. Acceptor either honours the bill or dishonours the bill.
In simple words: For the drawee to fulfill their payment obligation, the bill must be physically shown to them on the exact maturity date.

🎯 Exam Tip: Presentation is a crucial step for payment and also to formally establish dishonour if payment is refused.

Question 7.If a bill is discounted by the holder, no entry is passed in his book when the bill is honoured on the due date.
Answer: This statement is True.
On discounting the bill the holder gives the possession of the bill to the bank. On the maturity date, the bank has to present the bill to the drawee to collect the payment. When the discounted bill is honoured, the transaction takes place between drawee and bank.
In simple words: Once a bill is discounted, the original holder is no longer directly involved in its payment as the bank becomes responsible for collecting from the drawee.

🎯 Exam Tip: The transaction shifts from the drawer-drawee relationship to a bank-drawee relationship after discounting.

Question 8.Noting charges are to be borne by the drawer.
Answer: This statement is False.
Noting charges are to be borne by the drawee only as due to his act of non-payment, the bill is dishonoured and the drawer is not able to get money on its due date.
In simple words: While the drawer might initially pay noting charges, the ultimate responsibility for these fees lies with the drawee, whose failure to pay caused the bill's dishonour.

🎯 Exam Tip: While the drawer or holder might pay noting charges initially, they are reimbursed by the drawee.

Question 9.If a bill is drawn payable 'on demand' no grace days are allowed.
Answer: This statement is True.
'On demand' means the amount of the bill is to be paid by drawee immediately on presentation of the bill as no time period is mentioned on it. In demand bill, 3 days grace is not allowed by law.
In simple words: Bills that are specified as payable "on demand" must be paid immediately upon presentation and are not eligible for the additional three days of grace.

🎯 Exam Tip: The "on demand" clause is a key exception to the rule of adding grace days.

Question 10.There are three parties to a promissory note.
Answer: This statement is False.
There are only two parties to a promissory note, i.e. Drawer or maker of the note and drawee or payee of the note.
In simple words: A promissory note involves only two parties: the maker (who promises to pay) and the payee (who receives the payment).

🎯 Exam Tip: Clearly distinguish the number of parties in a bill of exchange (three) versus a promissory note (two).

D. Find The Odd One:

Question 1.(a) Retaining
(b) Noting
(c) Discounting
(d) Endorsing
Answer: (b) Noting
In simple words: Retaining, discounting, and endorsing are methods of dealing with or disposing of a bill, while noting is a formal action taken due to a bill's dishonour.

🎯 Exam Tip: Understand the different ways a bill can be handled (retained, discounted, endorsed) and differentiate them from actions taken when a bill is dishonoured (noting).

Question 2.(a) Trade bill
(b) Accommodation bill
(c) After date bill
(d) Demand bill
Answer: (d) Demand bill
In simple words: Trade bill and accommodation bill relate to the purpose, and an after date bill relates to the tenor, whereas a demand bill specifies immediate payment, making it distinct from the others in terms of its payment trigger.

🎯 Exam Tip: Categorize bills based on their purpose (trade, accommodation) and tenor (after date, demand).

Question 3.(a) Notary public
(b) Drawer
(c) Drawee
(d) Payee
Answer: (a) Notary public
In simple words: The drawer, drawee, and payee are the direct parties involved in the creation and payment of a bill, whereas a Notary Public is an external, impartial official.

🎯 Exam Tip: Identify the primary parties directly involved in the creation and payment of a bill of exchange versus external agents like a Notary Public.

Question 4.(a) Discounting charges
(b) Rebate
(c) Bank charges
(d) Noting charges
Answer: (d) Noting charges
In simple words: Discounting charges, rebate, and bank charges are financial costs or benefits associated with normal bill transactions, while noting charges are specific fees incurred due to the dishonour of a bill.

🎯 Exam Tip: Group related financial terms and distinguish them from charges incurred due to non-payment or legal formalities.

Question 5.(a) Stamp
(b) Acceptance
(c) Draft
(d) Amount
Answer: (c) Draft
In simple words: Stamp, acceptance, and amount are necessary components or stages of a valid bill of exchange, but a draft is the bill in its unaccepted, preliminary form.

🎯 Exam Tip: Recognize the key components of a bill of exchange and its terminology at various stages.

E. Complete The Sentences:

Question 1.Making payment of bill before the due date of maturity is known as _____
Answer: Retirement of Bill
In simple words: Retirement of a bill refers to the act of settling the payment obligation before the bill's official maturity date.

🎯 Exam Tip: Retirement offers a financial advantage to the drawee (rebate) and immediate cash to the holder.

Question 2.A person whose liabilities are more than his assets and is not in a position to pay off his liabilities is _____
Answer: Insolvent person
In simple words: An insolvent person is an individual or entity whose financial obligations exceed their available assets, making them unable to pay their debts.

🎯 Exam Tip: Insolvency has significant implications for creditors, often leading to bad debts.

Question 3.Amount that cannot be paid by acceptor on account of insolvency is known as _____
Answer: Deficiency
In simple words: Deficiency is the portion of a debt that remains unpaid by an insolvent acceptor after all their available assets have been used to settle their obligations.

🎯 Exam Tip: Deficiency represents the unrecoverable loss for the creditor when dealing with an insolvent debtor.

Question 4.A bill of exchange payable after certain period is known as _____
Answer: After date bill
In simple words: An "after date" bill specifies that its payment period begins from the date on which the bill itself was drawn.

🎯 Exam Tip: Differentiate "after date" bills from "after sight" bills, where the period is calculated from the date of acceptance.

Question 5.A bill which is drawn and accepted with valuable consideration is known as _____
Answer: Trade Bill
In simple words: A trade bill is a bill of exchange that arises from a genuine commercial transaction involving the sale and purchase of goods or services.

🎯 Exam Tip: Most bills of exchange are trade bills, backed by a real exchange of value.

Question 6.A person who draws the bill of exchange is known as _____
Answer: Drawer
In simple words: The drawer is the party who creates and signs the bill, instructing another party (the drawee) to pay a specified sum.

🎯 Exam Tip: The drawer is essentially the seller of goods or provider of services who is entitled to receive payment.

Question 7.A bill whose due date is calculated from the date of acceptance is known as _____
Answer: After sight bill
In simple words: An "after sight" bill's maturity period begins counting from the day the drawee accepts it, not from the date it was drawn.

🎯 Exam Tip: This type of bill ensures the drawee has seen and acknowledged the bill before the payment period begins.

Question 8.Recording the fact of dishonour of bill is known as _____
Answer: Noting
In simple words: Noting is the formal, legal act of recording the dishonour of a bill of exchange by a Notary Public.

🎯 Exam Tip: Noting provides legal proof of dishonour, which can be essential if legal action is required.

Question 9.When drawee accepts the bill payable at a particular place only, it is known as _____
Answer: qualified acceptance as to place
In simple words: This is an acceptance where the drawee restricts the payment to a specific location, meaning the bill must be presented there to be honored.

🎯 Exam Tip: Qualified acceptance introduces conditions to the payment obligation, which must be carefully noted by the holder.

Question 10.Fees charged by the bank for collection of bill on behalf of holder is _____
Answer: bank charges
In simple words: Bank charges are the service fees levied by a bank for undertaking the task of collecting payment for a bill on behalf of its client.

🎯 Exam Tip: Bank charges reduce the net amount received by the holder but relieve them of the responsibility of presenting the bill.

F. Answer In A Sentence:

Question 1.What do you mean by Bill of Exchange?
Answer: A Bill of Exchange is a written order signed by the drawer, directing a certain person to pay a certain sum of money on-demand or on a certain future date to a certain person or as per his order.
In simple words: A Bill of Exchange is a formal written command from one person to another to pay a specific amount to a third party, either immediately or at a future date.

🎯 Exam Tip: Focus on the key elements: written, order, signed, specific amount, specific date/on-demand, and parties involved.

Question 2.What are Days of Grace?
Answer: The three extra days allowed to the drawee or the acceptor of a bill for making payment on it are called Days of Grace.
In simple words: Days of Grace are the three additional days added to the nominal due date of a bill to determine its legal due date for payment.

🎯 Exam Tip: Grace days are statutory and apply to all bills of exchange except those payable on demand.

Question 3.What do you mean by Discounting a Bill of Exchange?
Answer: Encashment of a bill of exchange with the bank for certain cash which is less than the face value of the bill, before its due date by its drawer or holder is called Discounting of a Bill of Exchange.
In simple words: Discounting a bill means selling it to a bank before its maturity date to get immediate cash, with the bank deducting a fee called discounting charges.

🎯 Exam Tip: This method provides immediate liquidity but at a cost (discounting charges).

Question 4.What is Noting of the Bill?
Answer: Noting of a Bill of Exchange is the recording of the facts of its dishonour by a Notary public.
In simple words: Noting is the official procedure where a Notary Public formally records that a bill of exchange has been dishonoured (not accepted or paid).

🎯 Exam Tip: Noting creates formal evidence of dishonour, important for potential legal recourse.

Question 5.What are Noting Charges?
Answer: Noting Charges are the fees charged by the Notary public for noting the facts of dishonour on the face of the bill and in his official register.
In simple words: These are the professional fees a Notary Public charges for the service of officially certifying and recording the dishonour of a bill of exchange.

🎯 Exam Tip: Noting charges are ultimately borne by the drawee who caused the dishonour.

Question 6.What is the relationship between drawer and drawee?
Answer: The relationship between the drawer and the drawee is that of the creditor and debtor.
In simple words: The drawer is the creditor (the one who is owed money), and the drawee is the debtor (the one who owes money) in the context of a bill of exchange.

🎯 Exam Tip: This fundamental relationship underlies all transactions involving bills of exchange.

Question 7.Who is the Payee of the Bill?
Answer: The Payee of a Bill is the person to whom the bill is made payable or in whose favour the bill is drawn.
In simple words: The payee is the individual or entity who is designated to ultimately receive the payment specified by the bill of exchange.

🎯 Exam Tip: The payee can be the drawer themselves, or a third party to whom the drawer directs payment.

Question 8.What do you mean by Rebate?
Answer: Any concession or discount in monetary terms given by the holder of the bill of exchange to the drawee or acceptor, when a bill is retired is called a Rebate.
In simple words: A rebate is a reduction in the amount payable, granted by the holder to the drawee for settling a bill before its maturity date.

🎯 Exam Tip: Rebate encourages early payment and is a cost to the holder, but may improve cash flow for the drawee.

Question 9.What is the Legal Due Date?
Answer: The date which is arrived at after adding three days of grace to the nominal due date is known as Legal Due Date.
In simple words: The legal due date is the final date by which a bill of exchange must be paid, calculated by adding the grace days to the nominal due date.

🎯 Exam Tip: Correctly calculating the legal due date is vital for avoiding dishonour and penalties.

Question 10.What are Bills Payable on Demand?
Answer: When the amount of bill is payable by a drawee on the presentation of a bill, in which time period is not mentioned and grace days are not allowed is known as Bills Payable on Demand.
In simple words: Bills payable on demand are instruments that require immediate payment upon presentation, without a specific future date or any grace period.

🎯 Exam Tip: Remember that "on demand" bills are an exception to the grace days rule.

G. Do You Agree Or Disagree With The Following Statements:

Question 1.A bill of exchange is a conditional order.
Answer: Disagree
In simple words: A bill of exchange must contain an explicit and unconditional instruction to pay; any conditions would invalidate it as a proper bill.

🎯 Exam Tip: The "unconditional" nature is a defining characteristic of a bill of exchange.

Question 2.The party which is ordered to pay the amount is known as the payee.
Answer: Disagree
In simple words: The party ordered to pay is the drawee; the payee is the person who is ultimately entitled to receive that payment.

🎯 Exam Tip: Distinguish between the drawee (payer) and the payee (receiver) of the bill.

Question 3.The person in whose favour the bill is endorsed is known as the endorsee.
Answer: Agree
In simple words: An endorsee is the person who receives the bill and its rights when the original holder transfers it to them by signing on its back.

🎯 Exam Tip: Endorsement is the legal act of transferring the ownership of a bill.

Question 4.Rebate or discount given on retiring a bill is an income to the Drawee.
Answer: Agree
In simple words: When a drawee retires a bill early and receives a rebate, this concession reduces their expenditure, thereby counting as a financial gain or income for them.

🎯 Exam Tip: Recognize that a rebate is an expense for the holder but an income for the drawee.

Question 5.A bill from the point of view of the debtor is called Bills payable.
Answer: Agree
In simple words: For the debtor, who has accepted the bill and is obligated to pay, the bill represents a liability, which is termed as Bills Payable.

🎯 Exam Tip: Always consider the perspective (debtor or creditor) when classifying a bill as Bills Receivable or Bills Payable.

Question 6.In case of bill drawn payable 'on demand,' no grace days are allowed.
Answer: Agree
In simple words: Bills explicitly stating "on demand" are legally due for payment immediately upon presentation and are not granted any additional grace days.

🎯 Exam Tip: This is a crucial exception to the general rule of adding grace days.

Question 7.A bill is required to be accepted by Drawer.
Answer: Disagree
In simple words: The drawee is the party whose acceptance is required to make a bill of exchange a binding legal document, not the drawer who originally creates it.

🎯 Exam Tip: The drawer creates the bill, but the drawee's acceptance is what makes it a Bill of Exchange.

Question 8.A bill of exchange need not be dated.
Answer: Disagree
In simple words: A bill of exchange must include a date for its validity and for determining its maturity, especially for "after date" bills.

🎯 Exam Tip: The date is a fundamental requirement for the validity and clarity of a bill.

Question 9.A bill before acceptance is called Promissory Note.
Answer: Disagree
In simple words: A bill of exchange before it's accepted is called a draft; a promissory note is a distinct financial instrument which is a promise to pay, not an order.

🎯 Exam Tip: Distinguish between a draft (unaccepted bill) and a promissory note (a promise).

Question 10.Renewal is requested by the drawee to extend the credit period of the bill.
Answer: Agree
In simple words: The drawee typically requests to renew a bill when they are unable to make the payment on the original due date and require more time.

🎯 Exam Tip: Renewal often involves the drawee paying interest for the extended credit.

H. Calculations:

Question 1.Ganesh draws a bill for Rs. 40,260 on 15th Jan. 2020 for 50 days. He discounted the bill with the Bank of India @ 15% p.a. on the same day. Calculate the amount of discount.
Solution:
Discount = Amount of Bill x
\( \frac{\text{Rate}}{100} \) x
\( \frac{\text{Unexpired days}}{366} \)
= 40,260 x \( \frac{15}{100} \) x \( \frac{50}{366} \)
= Rs. 825
(Note: 2020 is a Leap year, so the total number of days = 366)
In simple words: The discount is the cost of getting the bill amount in advance from the bank, calculated on the principal, rate, and unexpired time, adjusted for a leap year.

🎯 Exam Tip: Accurately identifying the unexpired period and the correct annual days (365 or 366 for leap year) is vital for precise discount calculations.

Question 2.Shefali Traders drew a bill on Maya for Rs. 30,000 on 1st Oct. 2019 payable after 3 months.
Calculate the amount of discount in the following cases:
(i) Shefali Traders discounted the bill on the same day @ 12 % p.a.
(ii) Shefali Traders discounted the bill on 1st Nov. 2019 @ 12% p.a.
(iii) Shefali Traders discounted the bill on 1st Dec. 2019 @ 12% p.a.
Solution:
Discount = Amount of Bill x
\( \frac{\text{Rate}}{100} \) x
\( \frac{\text{Unexpired days}}{365} \)
In simple words: The discount amount changes based on how early the bill is discounted; the earlier it's discounted, the longer the unexpired period, and thus a higher discount.

🎯 Exam Tip: Always clearly determine the exact number of unexpired days or months from the date of discounting to the due date, including grace days, for each scenario.

 

**Question 3.** Veena who had accepted Sudha's bill for Rs. 28,000 was declared bankrupt and only 35 paise in a rupee could be recovered from her estate. Calculate the amount of bad debts.
Answer:Solution:
From Veena, only 35 paise in a rupee could be recovered i.e. 65 paise in a rupee is bad debt for Sudha. So 65% of Rs. 28,000 = Rs. 18,200 is the amount of bad debts.
In simple words: When a person declares bankruptcy, and only a portion of the amount owed can be recovered, the unrecoverable portion is considered bad debt. Here, 65% of the Rs. 28,000 bill could not be recovered, resulting in a bad debt of Rs. 18,200.

🎯 Exam Tip: Understanding the concept of bad debts in case of insolvency is crucial. Calculate the recoverable and non-recoverable amounts accurately based on the given recovery rate.

 

**Question 4.** Nitin renewed his acceptance for Rs. 72,000 by paying 22,000 in cash and accepting a new bill for the balance plus interest @ 18% p.a. for 4 months. Calculate the amount of the new bill.
Answer:Solution:
For Nitin,
Total outstanding = Rs. 72,000
Nitin paid in cash= Rs. 22,000
Remaining dues = Rs. 50,000
Now, on this Rs. 50,000 we have to calculate interest @ 18% for 4 months
\[ I = \frac{PRN}{100} \]
\[ = 50,000 \times \frac{18}{100} \times \frac{4}{12} \]
\[ = Rs. 3,000 \]
So, amount of new bill = Remaining dues + Interest
= 50,000 + 3,000
= Rs. 53,000
In simple words: To calculate the new bill amount, first subtract the cash payment from the total outstanding amount to find the remaining principal. Then, calculate the interest on this remaining principal for the given period and rate. The new bill amount will be the sum of the remaining principal and the calculated interest.

🎯 Exam Tip: Pay close attention to the terms of renewal, specifically the cash payment, the interest rate, and the period for calculating interest, to ensure the new bill amount is accurate.

 

**Question 5.** Nisha's acceptance for 16,850 sent to the bank for the collection was honoured and bank charges debited were Rs. 125. Find out the amount actually received by Drawer.
Answer:Solution:
Bill of 16,850 sent to the bank for collection and it is honoured and bank charges
= Rs. 125
So, actual amount received by drawer = 16,850 - 125 = Rs. 16,725.
In simple words: When a bill sent for collection is honoured by the drawee, the bank deducts its charges from the bill's face value before remitting the remaining amount to the drawer. The actual amount received by the drawer is the bill amount minus these bank charges.

🎯 Exam Tip: Remember that bank charges for collection are always deducted from the bill amount, reducing the net amount received by the drawer.

 

**Question 6.** A bill of 16,000 was drawn by Keshav on Gopal on 12th June 2019 for 2 months, what will be the due date, if all of sudden, the legal due date is declared as an emergency holiday?
Answer:Solution:
Consider immediate or next working day as the due date in case the legal due date is declared as an emergency holiday.
i.e. Here, it is 12th June, 2019
+ 2 months
+ 3 days of grace
12/06/2019
+ 02
+ 03
= 15/08/2019
\(\implies\) Legal due date is 16th August, 2019 (Next day).
\(\therefore\) The legal due date is 16th August 2019 (The next day).
In simple words: To find the due date, add the bill's term to the drawing date, then add three grace days. If this date falls on an emergency holiday, the due date shifts to the next immediate working day.

🎯 Exam Tip: Always account for three grace days when calculating the nominal due date. If the legal due date falls on a public or emergency holiday, the effective due date becomes the preceding working day, unless specified as the next working day in such emergency cases.

 

I. Prepare The Following Specimens

 

**Question 1.** Prepare a bill of exchange from the following information:
Drawer: Shankar, Vadodara, Gujarat
Drawee: Vinayak, Somwar Peth, Pune
Amount: 16,000
Period: 3 months
Date of Bill: 6th Sept. 2019
Date of acceptance: 11th Sept. 2019
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है। इसमें ऊपर दाईं ओर Drawer (शंंकर, वडोदरा, गुजरात) का पता और बिल की तारीख (6 सितंबर 2019) है। बिल की राशि (Rs. 16,000) ऊपरी बाईं ओर एक स्टाम्प के साथ दर्शाई गई है। बिल में तीन महीने बाद की अवधि के लिए Vinayak को भुगतान करने का निर्देश है। बिल Vinayak (ड्रॉई) द्वारा 11 सितंबर 2019 को स्वीकार किया गया है, जिसकी स्वीकृति का निशान बाईं ओर है, और दाईं ओर Shankar (ड्रॉअर) के हस्ताक्षर हैं।
In simple words: This question requires drawing a Bill of Exchange, which is a written order from the drawer to the drawee to pay a certain sum of money on a specified date. It includes details like the drawer, drawee, amount, period, and dates of drawing and acceptance.

🎯 Exam Tip: When preparing a Bill of Exchange specimen, ensure all key elements are present: stamp, amount, drawer's details, drawee's details, period, date of drawing, and clear acceptance by the drawee with the acceptance date and signature.

 

**Question 2.** Prepare a bill of exchange from the following information:
Drawer: Dinesh, P. R. Road, Andheri (West)
Drawee: Mahesh, L. B. S. Road, Mulund
Payee: Amit, Thane (West)
Amount: 9,500
Period of Bill: 4 months after sight
Date of Bill: 26th Nov. 2019
Date of acceptance: 29th Nov. 2019
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है जिसमें Drawer (दिनेश, अंधेरी), Drawee (महेश, मुलुंड) और Payee (अमित, ठाणे) तीनों अलग-अलग हैं। बिल की राशि (Rs. 9,500) ऊपरी बाईं ओर स्टाम्प के साथ है। बिल 26 नवंबर 2019 को बनाया गया है और इसमें चार महीने 'आफ्टर साइट' का उल्लेख है, जिसका अर्थ है स्वीकृति की तारीख से गणना की जाएगी। महेश ने इसे 29 नवंबर 2019 को स्वीकार किया है।
In simple words: This task involves creating a Bill of Exchange, detailing the drawer, drawee, and a third-party payee, along with the specified amount, 'after sight' period, and dates of drawing and acceptance.

🎯 Exam Tip: For 'after sight' bills, remember the period starts from the date of acceptance, not the drawing date. Clearly distinguish between the drawer, drawee, and payee when all three parties are different.

 

**Question 3.** Kantilal, 343/D, Palm Heights, Jogeshwari, drew a bill on 10th Oct. 2019 for 63,490 for 45 days after the date on Shantilal, B2, Himalaya Towers, Baramati, payable to Priyanka, Satara. The bill was accepted on 13th Oct. 2019 for 60 days. Prepare a format of bill of exchange from the above details.
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है जिसमें Kantilal (Drawer, जोगेश्वरी) ने Shantilal (Drawee, बारामती) पर बिल बनाया है, जो Priyanka (Payee, सतारा) को देय है। बिल की राशि (Rs. 63,490) और ड्राइंग की तारीख (10 अक्टूबर 2019) स्पष्ट रूप से अंकित है। बिल की अवधि 45 दिन 'आफ्टर डेट' है, लेकिन स्वीकृति 60 दिनों के लिए हुई है, जो एक योग्य स्वीकृति (qualified acceptance) को दर्शाता है। स्वीकृति की तारीख 13 अक्टूबर 2019 है।
In simple words: This question requires drafting a Bill of Exchange where Kantilal is the drawer, Shantilal is the drawee, and Priyanka is the payee, specifying the amount, drawing date, and an acceptance with a different period (60 days) than the original bill period (45 days), indicating a qualified acceptance.

🎯 Exam Tip: Be cautious of qualified acceptances where the terms of acceptance differ from the terms of the bill drawn (e.g., period difference). Clearly show both the original term and the accepted term in the diagram explanation if this happens.

 

**Question 4.** Prepare a format of bill exchange from the following:
Rahul Sane, 86-D, Raviwar Peth, Nagpur accepted the bill drawn on him by Prithviraj, Icon Heights, Wardha for Rs. 87,000 on 30th July 2019.
The bill was drawn on 26th July 2019 for Rs. 1,00,000 for 90 days after the date.
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है जहां Prithviraj (Drawer, वर्धा) ने Rahul Sane (Drawee, नागपुर) पर बिल बनाया है। बिल 26 जुलाई 2019 को Rs. 1,00,000 की राशि के लिए 90 दिनों 'आफ्टर डेट' पर ड्रा किया गया था। हालांकि, राहुल साने ने केवल Rs. 87,000 के लिए 30 जुलाई 2019 को 'स्वीकृत केवल' (Accepted only for) वाक्यांश के साथ बिल स्वीकार किया, जो राशि के संबंध में एक योग्य स्वीकृति (qualified acceptance) है।
In simple words: This task requires preparing a Bill of Exchange where Prithviraj is the drawer and Rahul Sane is the drawee. The bill was drawn for Rs. 1,00,000, but Rahul Sane accepted it only for Rs. 87,000, which is a qualified acceptance regarding the amount. The bill specifies 90 days after the drawing date.

🎯 Exam Tip: When a drawee accepts a bill for an amount different from the one drawn, it's a qualified acceptance. Ensure this difference is clearly noted in the acceptance part of the specimen. The stamp value should reflect the original bill amount.

 

**Question 5.** Prepare a format of bill of exchange from the following.
Drawer: Kashmira Shah, Partner M/S Shah, and Shah, 2 - C, Matruchhaya Building, Akola
Drawee: Dhanashree Traders, Bangalore Road, Belgaum (Signed by Jayshree, Partner)
Payee: M/S Janki Traders, Akola
Amount: 64,500
Period of Bill: 3 months
Date of drawing: 12th Sept. 2019
Date of acceptance: 15th Sept. 2019
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है जिसमें Drawer (M/S Shah and Shah, अकोला), Drawee (Dhanashree Traders, बेलगाम, Jayshree द्वारा हस्ताक्षरित) और Payee (M/S Janki Traders, अकोला) तीनों मौजूद हैं। बिल की राशि (Rs. 64,500) ऊपरी बाईं ओर स्टाम्प के साथ है। बिल 12 सितंबर 2019 को बनाया गया था और तीन महीने की अवधि के लिए है। Drawee, Dhanashree Traders ने इसे 15 सितंबर 2019 को स्वीकार किया है।
In simple words: This involves drafting a Bill of Exchange, specifying the drawer as M/S Shah and Shah, the drawee as Dhanashree Traders (signed by Jayshree as partner), and the payee as M/S Janki Traders. The bill amount is Rs. 64,500, with a 3-month period, drawn on September 12, 2019, and accepted on September 15, 2019.

🎯 Exam Tip: When dealing with firms or partnerships, ensure the drawer's and drawee's details include the firm's name and the authorized signatory (e.g., "Partner for Dhanashree Traders").

 

**Question 6.** Prepare a format Bill of Exchange with imaginary Drawer, Drawee, Address, Amount, Dates.
Drawer: Dhanesh Shah, 24/c, Amir Mahal, Borivali, Mumbai
Drawee: Kalpana Shah, 33, Sharadashram, Dadar (West), Mumbai
Amount: 80,500
Period: 60 days
Date of the bill: 2nd December 2020
Accepted on: 5th December 2020
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक विनिमय बिल (Bill of Exchange) का प्रारूप है जिसमें Drawer (धनेश शाह, मुंबई) और Drawee (कल्पना शाह, मुंबई) के काल्पनिक विवरण दिए गए हैं। बिल की राशि (Rs. 80,500) और ड्राइंग की तारीख (2 दिसंबर 2020) स्पष्ट रूप से अंकित है। बिल की अवधि 60 दिन है, और कल्पना शाह ने इसे 5 दिसंबर 2020 को स्वीकार किया है। यह एक सरल 'आफ्टर डेट' बिल है।
In simple words: This task requires creating a Bill of Exchange with imaginary details for the drawer (Dhanesh Shah, Mumbai) and drawee (Kalpana Shah, Mumbai), for an amount of Rs. 80,500, a period of 60 days, drawn on December 2, 2020, and accepted on December 5, 2020.

🎯 Exam Tip: For 'imaginary' details, ensure they are realistic and fit the structure of a Bill of Exchange, including full addresses and proper dates. The amount and period should be clearly indicated.

 

J. Complete The Following Table.

 

**Question 1.** Date of Drawing Date of Acceptance Payable Due Date
(i) 30.1.2019 1.2.2019 60 days after date
(ii) 17.8.2019 21.8.2019 3 months after sight
(iii) 23.12.2019 26.12.2019 1 months after date
(iv) 28.1.2020 28.1.2020 1 months after date
(v) 30.6.2019 2.7.2019 45 days after date
Answer:

Date of Drawing	Date of Acceptance	Payable	Due Date
(i) 30-01-2019	01-02-2019	60 days after date	3rd April, 2019
(ii) 17-08-2019	21-08-2019	3 months after sight	24th Nov. 2019
(iii) 23-12-2019	26-12-2019	1 month after date	25th Jan. 2019
(iv) 28-01-2020	28-01-2020	1 month after date	2nd Mar. 2019
(v) 30-06-2019	02-07-2019	45 days after date	17th Aug. 2019

In simple words: This table requires calculating the legal due date for various bills of exchange. For 'after date' bills, the period starts from the drawing date, and for 'after sight' bills, it starts from the acceptance date. Three grace days are added to the nominal due date to arrive at the legal due date.

🎯 Exam Tip: Meticulously count days/months from the correct starting date (drawing date for 'after date', acceptance date for 'after sight') and always add exactly three grace days to arrive at the legal due date.

 

**Question 2.**

Sr. No.	DATE OF DRAWING	Date of acceptance	Tenure	Type	Nominal due Date	Legal due date
i)	3rd January, 2020	5th January, 2020	45 days	after date	?	?
ii)	9th April, 2019	12th April, 2019	4 months	After sight	?	?
iii)	23rd November 2019	23rd November, 2019	2 months	after date	?	?
iv)	16th August, 2019	20th August, 2019	4 months	After sight	?	?
v)	23rd December, 2018	24th December, 2018	60 days	after date	?	?

Answer:

S.No.	Date of Drawing	Date of Acceptance	Tenure	Type	Nominal due Date	Legal due Date
(i)	3rd January, 2020	5th January, 2020	45 days	after date	17th Feb. 2020	20th Feb. 2020
(ii)	9th April, 2019	12th April, 2019	4 months	after sight	12th Aug. 2019	14th Aug. 2019
(iii)	23rd November, 2019	23rd November, 2019	2 months	after date	23rd Jan. 2020	25th Jan. 2020
(iv)	16th August, 2019	20th August, 2019	4 months	after sight	20th Dec. 2019	23rd Dec. 2019
(v)	23rd December, 2018	24th December, 2018	60 days	after date	21st Feb. 2019	24th Feb. 2019

In simple words: This exercise involves calculating both the nominal and legal due dates for various bills based on their drawing date, acceptance date, tenure, and type (after date/after sight). The nominal due date is derived from the term, and the legal due date adds three grace days to it.

🎯 Exam Tip: Correctly identifying whether a bill is 'after date' or 'after sight' is crucial for determining the starting point of the tenure calculation. Always perform both nominal and legal due date calculations, including the three grace days.

 

Practical Problems

 

**Question 1.** On 1st Jan., 2020 Hemant sold goods of Rs. 18,500 to Nitin. On the same date Hemant drew a bill of exchange for 18,500 at 2 months. On the due date the bill was duly honoured.
Give Journal Entries in the books of Hemant and Nitin. Prepare Hamant's Account in the books of Nitin.
Answer:Solution:
In the books of Hemant
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2020	Jan. 1	Nitin's A/c	Dr.	18,500
		To Sales A/c			18,500
	(Being goods sold on credit)
	1	Bills Receivable A/c	Dr.	18,500
		To Nitin's A/c			18,500
	(Being bill drawn and acceptance received from Nitin)
2020	Mar. 4	Cash/Bank A/c	Dr.	18,500
		To Bills Receivable A/c			18,500
	(Being Nitin's acceptance honoured on the due date)

In the books of Nitin
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2020	Jan. 1	Purchase A/c	Dr.	18,500
		To Hemant's A/c			18,500
	(Being goods purchased on credit)
	1	Hemant's A/c	Dr.	18,500
		To Bills Payable A/c			18,500
	(Being our acceptance is given)
2020	Mar. 4	Bills Payable A/c	Dr.	18,500
		To Cash/Bank A/c			18,500
	(Being our acceptance honoured on due date)

In the books of Nitin
Hemant's Account

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
2020 Jan. 1	To Bills Payable A/c		18,500	2020 Jan. 1	By Purchase A/c		18,500
			18,500				18,500

In simple words: This problem illustrates the accounting for a simple bill of exchange transaction where goods are sold on credit, a bill is drawn and accepted, and then duly honored. Journal entries are shown for both the drawer (Hemant) and the drawee (Nitin), along with Hemant's ledger account in Nitin's books.

🎯 Exam Tip: Ensure that corresponding entries are passed in both the drawer's and drawee's books for each transaction (sale/purchase, bill drawn/accepted, bill honored). Ledger accounts must balance correctly.

 

**Question 2.** Neha sold goods to Rohan Rs. 42,000 on 6th Sept. 2019. Neha drew a bill of exchange at 3 months for the amount which was accepted by Rohan. Neha discounted the bill with her bankers at Rs. 41,000. On the due date of the bill Rohan dishonoured the bill and bank paid 300 as Noting Charges.
Show Journal Entries in the books of Neha and Rohan.
Answer:Solution:
In the books of Neha
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	Sept. 6	Rohan's A/c	Dr.	42,000
		To Sales A/c			42,000
	(Being goods sold on credit)
	6	Bills Receivable A/c	Dr.	42,000
		To Rohan's A/c			42,000
	(Being bill drawn and acceptance received)
	6	Bank A/c	Dr.	41,000
		Discount A/c	Dr.	1,000
		To Bills Receivable A/c			42,000
	(Being Rohan's acceptance discounted with bank)
	Dec. 9	Rohan's A/c	Dr.	42,300
		To Bank A/c			42,300
	(Being Rohan's acceptance discounted with bank dishonoured and noting charges paid by the bank.)

In the books of Rohan
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	Sept. 6	Purchase A/c	Dr.	42,000
		To Neha's A/c			42,000
	(Being goods purchased on credit)
	6	Neha's A/c	Dr.	42,000
		To Bills Payable A/c			42,000
	(Being our acceptance given)
	Dec. 9	Bills Payable A/c	Dr.	42,000
		Noting Charges A/c	Dr.	300
		To Neha's A/c			42,300
	(Being our acceptance dishonoured and noting charges payable)

In simple words: This problem demonstrates journal entries for a bill of exchange that is discounted with the bank and subsequently dishonoured. It covers the sale of goods, drawing and acceptance of the bill, discounting it, and then the entries for dishonour and noting charges in both the drawer's (Neha) and drawee's (Rohan) books.

🎯 Exam Tip: When a discounted bill is dishonoured, the drawer becomes liable to the bank for the bill amount plus noting charges. The drawee is then liable to the drawer for the same total amount, including noting charges.

 

**Question 3.** Jyoti owes 31,000 to Swati for which she draws a bill on Jyoti for 2 months. The bill was duly accepted by Jyoti. Swati sends the bill to bank for collection. Jyoti honoured the bill on the due date and bank charges 475 as bank charges.
Give Journal Entries in the books of Swati.
Answer:Solution:
In the books of Swati
Journal Entries

Date	Particulars	L.F.	Amount (Rs.)
			Debit	Credit
(1)	Bills Receivable A/c	Dr.	31,000
	To Jyoti's A/c			31,000
	(Being bill drawn and acceptance received)
(2)	Bills Sent to Bank for Collection A/c	Dr.	31,000
	To Bills Receivable A/c			31,000
	(Being bill sent to bank for collection)
(3)	Bank A/c	Dr.	30,525
	Bank Charges A/c	Dr.	475
	To Bill Sent to Bank for Collection A/c			31,000
	(Being bill honoured and bank charges paid)

In simple words: This problem shows journal entries from the perspective of the drawer (Swati) when a bill of exchange is drawn, accepted by the drawee (Jyoti), sent to the bank for collection, and then honoured by the drawee, with the bank deducting its collection charges.

🎯 Exam Tip: When a bill is sent for collection, a "Bill Sent for Collection A/c" is used. Upon honour, the bank collects the amount, deducts its charges, and credits the net amount to the drawer's account. This process requires three distinct journal entries in the drawer's books.

 

**Question 4.** Pankaj purchased goods of Rs. 20,000 from Omprakash on credit on 15th April, 2019. Omprakash draws After Sight bill for the amount due on Pankaj for 3 months which was accepted by Pankaj on 18th April, 2019. On 20th April, 2019 Omprakash endorsed the bill to his creditor Jagdish in full settlement of his amount 21,000. On the due date the bill was dishonoured by Pankaj.
Give Journal Entries in the books of Omprakash, Pankaj and Jagdish.
Answer:Solution:
In the books of Omprakash
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	April 15	Pankaj's A/c	Dr.	20,000
		To Sales A/c			20,000
	(Being goods sold on credit)
	18	Bills Receivable A/c	Dr.	20,000
		To Pankaj's A/c			20,000
	(Being bill drawn and acceptance received)
	20	Jagdish's A/c	Dr.	21,000
		To Bills Receivable A/c			20,000
		To Discount A/c			1,000
	(Being Pankaj's acceptance endorsed)
	July 23	Pankaj's A/c	Dr.	20,000
		Discount A/c	Dr.	1,000
		To Jagdish's A/c			21,000
	(Being Pankaj's acceptance dishonoured and revert the Jagdish's A/c)

In the books of Pankaj
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	April 15	Purchase A/c	Dr.	20,000
		To Omprakash's A/c			20,000
	(Being goods purchased on credit)
	18	Omprakash's A/c	Dr.	20,000
		To Bills Payable A/c			20,000
	(Being our acceptance is given)
	20	No Entry
	July 23	Bill Payable A/c	Dr.	20,000
		To Omprakash's A/c			20,000
	(Being our acceptance dishonoured on due date)

In the books of Jagdish
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	April 20	Bills Receivable A/c	Dr.	20,000
		Discount A/c	Dr.	1,000
	To Omprakash's A/c			21,000
(Being Bills Receivable received)
	July 23	Omprakash's A/c	Dr.	21,000
		To Bills Receivable A/c			20,000
		To Discount A/c			1,000
	(Being Bills receivable dishonoured)

In simple words: This complex problem involves a credit sale, a bill drawn 'after sight', its endorsement to a creditor (Jagdish) in full settlement, and finally, the bill's dishonour by the drawee (Pankaj). Journal entries are provided for all three parties: Omprakash (drawer/endorser), Pankaj (drawee), and Jagdish (endorsee).

🎯 Exam Tip: When a bill is dishonoured after endorsement, the endorsee (Jagdish) will debit the endorser (Omprakash), and the endorser (Omprakash) will debit the drawee (Pankaj). The original discount given during endorsement must also be reversed.

 

**Question 5.** Siddhant sold goods to Sudhir of Rs. 43,800 on 18th March, 2019. Siddhant draws a bill on Sudhir on the same day for 43,800 for 3 months which was duly accepted by Sudhir. Siddhant discounted the bill on the same day at 8% p.a. The bill was dishonoured on the due date and Sudhir requested Siddhant to accept Rs. 13,800 and interest in cash on remaining amount at 12% p.a. Siddhant agreed and for the balance amount accepted a new bill at 2 months. Before the due date of new bill Sudhir retired the bill by paying 29,700.
Pass necessary Journal Entries in the books of Siddhant.
Answer:Solution:
In the books of Siddhant
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
2019	Mar. 18	Sudhir's A/c	Dr.	43,800
		To Sales A/c			43,800
	(Being goods sold on credit)
	18	Bills Receivable A/c	Dr.	43,800
		To Sudhir's A/c			43,800
	(Being bill drawn and acceptance received)
	18	Cash/Bank A/c	Dr.	42,924
		Discount A/c	Dr.	876
		To Bill Receivable A/c			43,800
	(Being Sudhir's acceptance discounted with bank)
	June 21	Sudhir's A/c	Dr.	43,800
		To Cash/Bank A/c			43,800
	(Being Sudhir's acceptance dishonoured on due date)
	21	Cash A/c	Dr.	14,400
		To Interest A/c			600
		To Sudhir's A/c			13,800
	(Being cash accepted with interest from Sudhir)
	21	New Bills Receivable A/c	Dr.	30,000
		To Sudhir's A/c			30,000
	(Being Sudhir's acceptance received for new bill)
	-	Cash/Bank A/c	Dr.	29,700
		Rebate A/c	Dr.	300
		To New Bills Receivable A/c			30,000
	(Being before due date, Sudhir's retired the bill with discount)

Working Notes:
1. March 18, Discount = \( 43,800 \times \frac{3}{12} \times \frac{8}{100} = \text{Rs.} 876 \)
2. March 21, calculation of interest balance amount:
\[ I = \frac{PRN}{100} \]
\[ = 30,000 \times \frac{12}{100} \times \frac{2}{12} \text{ (for 2 months on remaining amount Rs. 30,000)} \]
\[ = \text{Rs.} 600 \]
3. Before due date bill was retired by Sudhir by paying 300 less which is considered as discount and as date is not given, here it is not recorded.
In simple words: This comprehensive problem tracks a bill of exchange through several stages: sale, drawing/acceptance, discounting, dishonour, renewal with part cash payment and interest, acceptance of a new bill, and finally, the early retirement of the new bill with a rebate. All journal entries are recorded in Siddhant's (drawer's) books.

🎯 Exam Tip: This question tests multiple concepts: discounting, dishonour, renewal (part cash + interest + new bill), and retirement with rebate. Ensure each transaction is recorded accurately and calculations for discount, interest, and rebate are correct.

 

**Question 6.** Sangeeta accepted a bill for Rs. 18,000 drawn by Geeta at 3 months. Geeta discounted the bill for Rs. 17,400. Before the due date Sangeeta approached Geeta for renewal of the bill. Geeta agreed on the condition that Sangeeta should pay 6,000 immediately and for the balance she should accept a new bill for 4 months along with interest Rs. 550. The arrangements were carried through. But on the due date of new bill Sangeeta became insolvent and 35 paise in a rupee could be recovered from her estate.
Give Journal Entries in the books of Sangeeta and prepare Sangeeta's Account in the books of Geeta.
Answer:Solution:
In the books of Sangeeta
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
	1	Geeta's A/c	Dr.	18,000
		To Bill Payable A/c			18,000
	(Being our acceptance is given)
	2	Bills Payable A/c	Dr.	18,000
		To Geeta's A/c			18,000
	(Being bill cancelled on our request)
	3	Geeta's A/c	Dr.	6,000
		To Bank A/c			6,000
	(Being part payment made)
	4	Interest A/c	Dr.	550
		To Geeta's A/c			550
	(Being the interest due on balance amount to be paid)
	5	Geeta's A/c	Dr.	12,550
		To New Bills Payable A/c			12,550
	(Being the acceptance given for balance amount plus amount of interest)
	6	New Bills Payable A/c	Dr.	12,550
		To Geeta's A/c			12,550
	(Being new bill dishonoured)
	7	Geeta's A/c	Dr.	12,550
		To Cash A/c			4,393
		To Deficiency A/c			8,157
	(Being 35% of the amount due paid and balance credited to deficiency A/c)

In the books of Geeta
Sangeeta's Account

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
	To Balance b/d		18,000	1	By Bill Receivable A/c (Acceptance received)		18,000
3	To Bank A/c (Dishonour)		18,000	4	By Bank A/c (Part payment)		6,000
5	To Interest A/c (Int. due)		550	6	By Bills Receivable A/c (New acceptance)		12,550
7	To Bills Receivable A/c (Dishonour)		12,550	8	By Cash A/c		4,393
					By Bad debts A/c		8,157
			49,100				49,100

Working Notes:
1. It is advisable to write journal entries in the books of Geeta also to get entries in 'Sangeeta's Account' property.
In the books of Geeta
Journal Entries

Date		Particulars	L.F.	Amount (Rs.)
Year	Month/Day			Debit	Credit
	1	Bills Receivable A/c	Dr.	18,000
		To Sangeeta's A/c			18,000
	(Being our acceptance is given)
	2	Bank A/c	Dr.	17,400
		Discount A/c	Dr.	600
		To Bills Receivable A/c			18,000
	(Being cancellation of discounted bill)
	3	Sangeeta's A/c	Dr.	18,000
		To Bank A/c			18,000
	(Cancellation of discounted bill)
	4	Bank A/c	Dr.	6,000
		To Sangeeta's A/c			6,000
	(Being part payment made)
	5	Sangeeta's A/c	Dr.	550
		To Interest A/c			550
	(Being interest amount due)
	6	Bills Receivable A/c	Dr.	12,550
		To Sangeeta's A/c			12,550
	(Being new bill drawn and acceptance received)
	7	Sangeeta's A/c	Dr.	12,550
		To Bills Receivable A/c			12,550
	(Being new bill dishonoured)
	8	Cash A/c	Dr.	4,393
		Bad debts A/c	Dr.	8,157
		To Sangeeta's A/c			12,550
	(Being the amount of the bill collected by the bank and credited to our Account by deducting bank charges)

In simple words: This problem covers a complex sequence of events: bill drawing, discounting, renewal (with part payment and interest), acceptance of a new bill, subsequent insolvency of the drawee (Sangeeta), and partial recovery of the amount. Journal entries are required for both Sangeeta (drawee) and Geeta (drawer), along with Sangeeta's account in Geeta's books.

🎯 Exam Tip: In insolvency cases, carefully calculate the recoverable amount (based on paise in a rupee) and the bad debts. Remember to pass entries for the cancellation of the old bill, recording interest, partial cash payment, new bill acceptance, and finally, the dishonour and bad debts related to the new bill.

Working Notes:

1. It is advisable to write journal entries in the books of Geeta also to get entries in 'Sangeeta's Account' property.

In the books of Geeta

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1	Geeta's A/c	Dr.	18,000
	To Bill Payable A/c			18,000
	(Being our acceptance is given)
2	Bills Payable A/c	Dr.	18,000
	To Geeta's A/c			18,000
	(Being bill cancelled on our request)
3	Geeta's A/c	Dr.	6,000
	To Bank A/c			6,000
	(Being part payment made)
4	Interest A/c	Dr.	550
	To Geeta's A/c			550
	(Being the interest due on balance amount to be paid)
5	Geeta's A/c	Dr.	12,550
	To New Bills Payable A/c			12,550
	(Being the acceptance given for balance amount plus amount of interest)
6	New Bills Payable A/c	Dr.	12,550
	To Geeta's A/c			12,550
	(Being new bill dishonoured)
7	Geeta's A/c	Dr.	12,550
	To Cash A/c			4,393
	To Deficiency A/c			8,157
	(Being 35% of the amount due paid and balance credited to deficiency A/c)

In the books of Geeta

Dr. Sangeeta's Account Cr.

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
	To Balance b/d		18,000	1	By Bill Receivable A/c		18,000
3	To Bank A/c (Dishonour)		18,000		(Acceptance received)
5	To Interest A/c (Int. due)		550	4	By Bank A/c (Part payment)		6,000
7	To Bills Receivable A/c		12,550	6	By Bills Receivable A/c		12,550
	(Dishonour)				(New acceptance)
				8	By Cash A/c		4,393
					By Bad debts A/c		8,157
			49,100				49,100

 

Question 7. Priyanka owed Meena Rs. 18,000, Priyanka accepted a bill drawn by Meena for the amount at 4 months. Meena endorsed the same bill to Sagar. Before due date Priyanka approached Meena for renewal of bill. Meena agreed on condition that Rs. 6,000 be paid immediately together with interest on the remaining amount of 8% p.a. for 3 months and Priyanka should accept a new bill for the balance amount. These arrangements were carried through. However, before the due date Priyanka became insolvent and only 50% of the amount could be recovered from her estate. Give Journal Entries in the books of Meena.
Answer:
Solution: In the books of Meena

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1	Bills Receivable A/c	Dr.	18,000
	To Priyanka's A/c			18,000
	(Being bill drawn and acceptance is received)
2	Sagar's A/c	Dr.	18,000
	To Bills Receivable A/c			18,000
	(Being bill endorsed in favour of Sagar)
3	Priyanka's A/c	Dr.	18,000
	To Sagar's A/c			18,000
	(Being the bill cancelled at the request of Priyanka)
4	Cash A/c	Dr.	6,240
	To Interest A/c			240
	To Priyanka's A/c			6,000
5	Bills Receivable A/c	Dr.	12,000
	To Priyanka's A/c			12,000
	(Being new bill of remaining amount drawn and acceptance is received)
6	Priyanka's A/c	Dr.	12,000
	To Bills Receivable A/c			12,000
	(Being the bill dishonoured for non-payment)
7	Cash A/c	Dr.	6,000
	Bad debts A/c	Dr.	6,000
	To Priyanka's A/c			12,000
	(Being part payment received at the time of insolvency)

Working Note:

Calculation of interest on remaining amount Rs. 12,000 @ 8% p.a. and for 3 months
I = \( \frac{PRN}{100} \)
\( \implies = 12,000 \times \frac{8}{100} \times \frac{3}{12} \)
\( \implies = \text{Rs.} 240 \)

In simple words: This question involves recording journal entries for a series of transactions related to a bill of exchange, including endorsement, renewal, part payment, interest calculation, and handling insolvency where only a percentage of the amount is recovered.

🎯 Exam Tip: Pay close attention to the sequence of events and how each transaction affects the parties involved. Ensure accurate calculation of interest and bad debts, and proper journalization of each stage from drawing to dishonour and settlement.

 

Question 8. Seema purchased goods from Roma on credit on 1st August, 2019 for Rs. 37,000. Seema accepts bill for 2 months drawn by Roma for the same amount. On the same day, Roma discounts the bill with the bank for Rs. 36,200 on 3rd August, 2019. On the due date the bill is dishonoured and Noting Charges of Rs. 160 is paid by the bank. Seema pays Rs. 19,000 and Noting Charges in cash immediately. A new bill is drawn by Roma for the balance including interest Rs. 650 for 2 months, which is accepted by Seema. The new bill is retired one month before the due date at a rebate of Rs. 300. Give Journal Entries in the books of Seema and prepare Seema's Account in the books of Roma.
Answer:
Solution:

In the books of Seema

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
2019 Aug. 1	Purchase A/c	Dr.	37,000
	To Roma's A/c			37,000
	(Being goods purchased on credit)
1	Roma's A/c	Dr.	37,000
	To Bills Payable A/c			37,000
	(Being our acceptance is given)
Oct. 4	Bills Payable A/c	Dr.	37,000
	To Roma's A/c			37,000
	(Being our acceptance dishonoured)
4	Noting Charges A/c	Dr.	160
	To Roma's A/c			160
	(Being noting charges due to Roma)
4	Roma's A/c	Dr.	19,160
	To Cash A/c			19,160
	(Being paid part payment and noting charges in cash)
4	Interest A/c	Dr.	650
	To Roma's A/c			650
	(Being interest amount due)
4	Roma's A/c	Dr.	18,650
	To Bills Payable A/c			18,650
	(Being remaining due amount with interest, our acceptance is given)
Nov. 7	Bills Payable A/c	Dr.	18,650
	To Cash A/c			18,350
	To Rebate A/c			300
	(Being before one month of due date, Bills payable amount paid at a rebate of Rs.300)

In the books of Roma

Dr. Seema's Account Cr.

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
2019 Aug. 1	To Sales A/c		37,000	2019 Aug. 1	By Bills Receivable A/c		37,000
Oct. 4	To Bank A/c		37,160	4	By Cash A/c		19,160
	(Dishonour & Noting Charges)			Nov. 7	By Bills Receivable A/c		18,650
4	To Interest A/c		650		(New)
			74,810				74,810

In simple words: This complex problem involves multiple accounting events: goods sold on credit, acceptance of a bill, discounting the bill, dishonour on due date, payment of noting charges, part payment by drawee, renewal of bill with interest, and early retirement of the new bill with a rebate.

🎯 Exam Tip: Break down multi-event problems into individual transactions. Accurately calculate discount, interest, and rebate. Ensure entries for dishonour, renewal, and retirement are correctly passed in both parties' books, especially for discounted bills.

 

Question 9. Uday purchased goods from Shankar on credit for Rs. 35,000 at 10 % trade discount. Uday paid Rs. 1,500 immediately and for the balance accepted a bill for 3 months. Before due date Uday approached Shankar with a request to renew the bill. Shankar agreed but with condition that Uday should accept a new bill for 3 months including interest at 12% p.a. Give Journal Entries in the books of Shankar.
Answer:
Solution:

In the books of Shankar

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1	Uday's A/c	Dr.	31,500
	To Sales A/c			31,500
	(Being goods sold on credit @ 10% trade discount)
2	Cash A/c	Dr.	1,500
	To Uday's A/c			1,500
	(Being cash received from Uday)
3	Bills Receivable A/c	Dr.	30,000
	To Uday's A/c			30,000
	(Being bill drawn and acceptance received)
4	Uday's A/c	Dr.	30,000
	To Bills Receivable A/c			30,000
	(Being the bill cancelled at the request of Uday)
5	Uday's A/c	Dr.	900
	To Interest A/c			900
	(Being interest amount due)
6	New Bills Receivable A/c	Dr.	30,900
	To Uday's A/c			30,900
	(Being new bill drawn with interest and acceptance received)

Working Note:

I = \( \frac{PRN}{100} \)
\( \implies = 30,000 \times \frac{12}{100} \times \frac{3}{12} \)
\( \implies = \text{Rs.} 900 \)

In simple words: This problem involves initial sale, part cash payment, acceptance of a bill, and subsequent renewal of the bill due to the drawee's request, including the calculation and charging of interest on the renewed amount.

🎯 Exam Tip: Remember to calculate trade discount at the time of sale and interest during bill renewal. Journal entries should clearly reflect the cancellation of the old bill and the creation of a new one with interest.

 

Question 10. Sagar drawn an after sight bill on 21st Nov., 2019 for Rs. 21,000 at 3 months on Prasad. The bill is discounted by Sagar at 8% p.a. with his bank. On maturity. Prasad finds himself unable to make payment of the bill and requests Sagar to renew it. Sagar accepts the request and draws a new bill at one month for Rs. 21,750 including interest which was duly accepted by Prasad. Sagar deposits the bill into bank for the collection. Prasad honours the bill on the due date and bank charges Rs. 250 as bank charges. Pass necessary Journal Entries in the books of Sagar and prepare Sagar's Account in the books of Prasad.
Answer:
Solution:

In the books of Sagar

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
2019 Nov. 21	Bills receivable A/c	Dr.	21,000
	To Prasad's A/c			21,000
	(Being bill drawn and acceptance received.)
21	Bank A/c	Dr.	20,580
	Discount A/c	Dr.	420
	To Bills Receivable A/c			21,000
	(Being bill discounted with bank)
2020 Feb. 24	Prasad's A/c	Dr.	21,000
	To Bank A/c			21,000
	(Being the bill cancelled)
24	Prasad's A/c	Dr.	750
	To Interest A/c			750
	(Being interest amount due)
24	New Bills Receivable A/c	Dr.	21,750
	To Prasad's A/c			21,750
	(Being new bill drawn and acceptance received)
24	Bill Sent for Collection A/c	Dr.	21,750
	To New Bills Receivable A/c			21,750
	(Being new bill sent for collection to bank)
Mar. 27	Bank A/c	Dr.	21,500
	Bank Charges A/c	Dr.	250
	To Bill sent for collection A/c			21,750
	(Being the amount of the bill collected by the bank and credited to our Account by deducting bank charges)

In the books of Prasad

Dr. Sagar's Account Cr.

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
2019 Nov. 21	To Bills Payable A/c		21,000	2019 Nov. 21	By Balance b/d		21,000
24	To Bill Payable A/c		21,750	2020 Feb. 24	By Bills Payable A/c		21,000
	(New acceptance given)				(Dishonour)
				24	By Interest A/c		750
			42,750		(Int. due)		42,750

In simple words: This problem covers a full cycle of bill of exchange transactions: drawing, discounting with the bank, dishonour, renewal with interest, deposit for collection, and final honouring with bank charges.

🎯 Exam Tip: When a bill is discounted and then dishonoured, the drawer must account for the bank's role. For renewal, remember to charge interest. Collection by bank involves bank charges which reduce the amount received.

 

Question 11. Journalise the following transaction in the books of Abhishek:
(a) Siddhant informs Abhishek that Vineet's acceptance for Rs. 23,000 endorsed to Siddhant has been dishonoured. Noting Charges amounted to Rs. 430.
(b) Kajal renews her acceptance to Abhishek for Rs. 39,000 by paying Rs. 3,000 in cash and accepting a fresh bill for the balance along with interest at 11.5% p.a. for 3 months.
(c) Radhika retired her acceptance to Abhishek for Rs. 23,000 by paying Rs. 22,250 by cheque.
(d) Abhishek sent a bill of Subodh for Rs. 9,000 to bank for collection. Bank informed that the bill has been dishonoured by Subodh.
Answer:
Solution:

In the books of Abhishek

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	(a)	Vineet's A/c	Dr.	23,430
		To Siddhant's A/c		23,430
		(Being Vineet's acceptance endorsed to Siddhant dishonoured and noting charges amount is included)
	(b) (i)	Kajal's A/c	Dr.	39,000
		To Bills Receivable A/c		39,000
		(Being cancellation of bill)
	(ii)	Cash A/c	Dr.	3,000
		To Kajal's A/c		3,000
		(Being cash received from Kajal)
	(iii)	Kajal's A/c	Dr.	1,035
		To Interest A/c		1,035
		(Being interest amount due)
	(iv)	New Bills Receivable A/c	Dr.	37,035
		To Kajal's A/c		37,035
		(Being new bill drawn and acceptance is received)
	(c)	Bank A/c	Dr.	22,250
		Rebate A/c	Dr.	750
		To Bills Receivable A/c		23,000
		(Being Radhika retired her acceptance)
	(d) (i)	Bill Sent for Collection A/c	Dr.	9,000
		To Bills Receivable A/c		9,000
		(Being Subodh's acceptance sent to bank for collection)
	(ii)	Subodh's A/c	Dr.	9,000
		To Bill Sent for collection A/c		9,000
		(Being Subodh's acceptance dishonoured.)

Working Note:

Amount of interest = \( 36,000 \times \frac{11.5}{100} \times \frac{3}{12} \)
\( \implies = \text{Rs.} 1,035. \)

In simple words: This question requires journalizing various bill of exchange transactions: dishonour of an endorsed bill, renewal of a bill involving cash payment and interest, retirement of a bill with rebate, and dishonour of a bill sent for collection.

🎯 Exam Tip: Accurately identify the parties involved in each transaction (drawer, drawee, endorsee, bank). Ensure correct accounting for noting charges, interest, and rebate. For dishonoured endorsed bills, the original drawer debits the drawee and credits the endorsee.

 

Question 12. Journalise the following transaction in the books of Narendra:
(a) Narendra retires his acceptance to Upendra by paying Rs. 4,000 in cash and endorsing a bill accepted by Ramlal for Rs. 5,000.
(b) Vikram's acceptance to Narendra Rs. 6,000 retired one month before the due date at rebate of 12% p.a.
(c) Dilip renews his acceptance to Narendra for Rs. 12,000 by paying Rs. 4,000 in cash and accepting a fresh bill for the balance plus interest at 12% p.a. for 3 months.
(d) Bank informed Narendra that, Kartik's acceptance for Rs. 13,000 to Narendra, discounted with the bank was dishonoured and Noting Charges paid by bank Rs. 140.
Answer:
Solution:

In the books of Narendra

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	(a)	Bills Payable A/c	Dr.	9,000
		To Cash A/c			4,000
		To Bills Receivable A/c			5,000
		(Being Upendra's dues cleared by paying cash and endorsing a bill)
	(b)	Cash A/c	Dr.	5,940
		Rebate A/c	Dr.	60
		To Bills Receivable A/c			6,000
		(Being Vikram's acceptance retired with rebate)
	(c) (i)	Dilip's A/c	Dr.	12,000
		To Bills Receivable A/c			12,000
		(Being cancellation of bill)
	(ii)	Cash A/c	Dr.	4,000
		To Dilip's A/c			4,000
		(Being cash received)
	(iii)	Dilip's A/c	Dr.	240
		To Interest A/c			240
		(Being interest due)
	(iv)	Bills Receivable A/c	Dr.	8,240
		To Dilip's A/c			8,240
		(Being fresh bill accepted by Dilip for remaining amount plus interest)
	(d)	Kartik's A/c	Dr.	13,140
		To Bank A/c			13,140
		(Being Kartik's acceptance dishonoured and bank paid noting charges)

In simple words: This question involves multiple scenarios for bills of exchange: retirement of own acceptance, retirement of another's acceptance with rebate, renewal of a bill with part cash and interest, and dishonour of a discounted bill with noting charges.

🎯 Exam Tip: Distinguish between retiring own bills payable (debit Bills Payable) and others' bills receivable (credit Bills Receivable). Calculate rebate and interest carefully. For dishonoured discounted bills, debit the drawee and credit the bank, including noting charges.

 

Question 13. Journalise the following transaction in the books of Bharti:
(a) Bank informed that Amit's acceptance for Rs. 15,750 sent to bank for collection was honoured and bank charges debited were Rs. 150.
(b) Nitin renewed his acceptance for Rs. 22,200 by paying Rs. 2,200 in cash along with interest on balance amount at 10% and accepted a fresh bill for the balance for 3 months.
(c) Dhanshri who had accepted Bharti's bill for Rs. 17,500 was declared insolvent and only 40% of the amount due could be recovered from her estate.
(d) Discharged our acceptance to Savita for Rs. 9,450 by endorsing Pravin's acceptance to us Rs. 9,000.
Answer:
Solution:

In the books of Bharti

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	(a)	Bank A/c	Dr.	15,600
		Bank Charges A/c	Dr.	150
		To Bill sent for collection A/c			15,750
		(Being the amount of Bill collected by bank and credited to our Bank A/c and Bank Charges debited)
	(b) (i)	Nitin's A/c	Dr.	22,200
		To Bills Receivable A/c			22,200
		(Being cancellation of bill)
	(ii)	Nitin's A/c	Dr.	500
		To Interest A/c			500
		(Being interest amount due)
	(iii)	Cash A/c	Dr.	2,700
		To Nitin's A/c			2,700
		(Being part payment along with interest received)
	(iv)	Bills Receivable A/c	Dr.	20,000
		To Nitin's A/c			20,000
		(Being the acceptance received for balance amount due)
	(c) (i)	Dhanshri's A/c	Dr.	17,500
		To Bills Receivable A/c			17,500
		(Being bill dishonoured for non-payment)
	(ii)	Cash A/c	Dr.	7,000
		Bad Debts A/c	Dr.	10,500
		To Dhanshri's A/c			17,500
		(Being 40% due amount received from Dhanshri, as being declared insolvent)
	(d)	Bills Payable A/c	Dr.	9,450
		To Discount A/c			450
		To Bills Receivable A/c			9,000
		(Being our acceptance Savita i.e. B. P. is cleared by endorsing Pravin's acceptance i.e. B. R.)

In simple words: This question requires journal entries for various scenarios: bill sent for collection honoured with bank charges, renewal of a bill with part cash and interest, dishonour of a bill due to drawee insolvency and partial recovery, and discharging own acceptance by endorsing another's bill.

🎯 Exam Tip: Remember to debit bank charges as an expense. For insolvency, split the outstanding amount into cash received and bad debts. When an acceptance is discharged by endorsement, debit Bills Payable and credit Bills Receivable for the endorsed bill, along with any cash or discount differences.

 

Question 14. Journalise the following transaction in the books of Sudha:
(a) Endorsed Sonali's acceptance at 2 months for Rs. 6,000 in favour of Urmila and paid cash Rs. 3,500 in full settlement of her account Rs. 10,000.
(b) Discounted 2 months acceptance of Surya for Rs. 7,800 with bank at 10% p.a.
(c) Bank informed that Anuradha's acceptance of Rs. 4,800 which was discounted was dishonoured and bank paid Noting Charges Rs. 125.
(d) Pooja honoured her acceptance of Rs. 16,400 which was deposited into bank for collection.
Answer:
Solution:

In the books of Sudha

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	(a)	Urmila's A/c	Dr.	10,000
		To Cash A/c			3,500
		To Discount A/c			500
		To Bills Receivable A/c			6,000
		(Being Sonali's acceptance endorsed in favour of Urmila with cash to clear her debt)
	(b)	Bank A/c	Dr.	7,670
		Discount A/c	Dr.	130
		To Bills Receivable A/c			7,800
		(Being discounted Surya's acceptance with bank)
		\( (Hint: 7,800 \times \frac{10}{100} \times \frac{2}{12} = 130) \)
	(c)	Anuradha's A/c	Dr.	4,925
		To Bank A/c			4,925
		(Being discounted bill dishonoured and noting charges paid by bank)
	(d)	Bank A/c	Dr.	16,400
		To Bill Sent for Collection A/c			16,400
		(Being amount of the bill collected and credited in our bank account)

In simple words: This question involves journalizing diverse transactions like clearing a creditor's account by endorsing a bill and paying cash, discounting a bill, accounting for a dishonoured discounted bill with noting charges, and honouring a bill sent for collection.

🎯 Exam Tip: Accurately calculate discounts (both on settlement and for bill discounting). For dishonoured discounted bills, debit the drawee, credit the bank, and include noting charges. Ensure clear distinction between bills receivable and bills sent for collection accounts.

 

Question 15. Journalise the following transaction in the books of Mrunal:
(a) Bank informed that Aishwarya's acceptance of Rs. 24,000 which was discounted had been dishonoured and bank paid Noting Charges Rs. 220. Bill was renewed at the request of Aishwarya for 2 months with interest of Rs. 480.
(b) Received Rs. 4,630 from private estate of Ankur who was declared insolvent against bill accepted by him for Rs. 6,000.
(c) Accepted a bill of Rs. 15,000 at 3 months drawn by Anushka for the amount due to her Rs. 20,000 and balance paid by cheque.
(d) Dishonoured our acceptance to Vivek Rs. 27,000 and Noting Charges paid by Vivek Rs. 700.
Answer:
Solution:

In the books of Mrunal

Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	(a) (i)	Aishwarya's A/c	Dr.	24,000
		To Bank A/c			24,000
		(Being discounted bill dishonoured)
	(ii)	Aishwarya's A/c	Dr.	220
		To Bank A/c			220
		(Being noting charges paid and adjusted)
	(iii)	Aishwarya's A/c	Dr.	480
		To Interest A/c			480
		(Being interest amount due)
	(iv)	Bills Receivable A/c	Dr.	24,700
		To Aishwarya's. A/c			24,700
		(Being new acceptance received from Aishwarya for balance receivable)
	(b)	Cash A/c	Dr.	4,630
		Bad Debts A/c	Dr.	1,370
		To Ankur's A/c			6,000
		(Being cash received and write off remaining amount of Ankur)
	(c)	Anushka's A/c	Dr.	20,000
		To Bank A/c			5,000
		To Bills Payable A/c			15,000
		(Being our acceptance and cheque given to Anushka against her dues)
	(d)	Bills Payable A/c	Dr.	27,000
		Noting Charges A/c	Dr.	700
		To Vivek's A/c			27,700
		(Being our acceptance dishonoured and Vivek paid noting charges)

In simple words: This question requires journal entries for four distinct bill of exchange scenarios: dishonour of a discounted bill followed by renewal with interest, partial recovery from an insolvent drawee, settling a debt by part payment and accepting a bill, and dishonour of one's own acceptance where the holder paid noting charges.

🎯 Exam Tip: When a discounted bill is dishonoured, debit the drawee for the bill amount plus noting charges, and credit the bank. For renewal, ensure interest calculation and new bill acceptance. Differentiate between Bad Debts (unrecoverable) and cash received from an insolvent party.

Class 12 Commerce BK Textbook Solutions Digest

(i) 12th Bk Chapter 1 Practical Problems
(ii) 12th Bk Chapter 2 Practical Problems
(iii) 12th Bk Chapter 3 Practical Problems
(iv) 12th Bk Chapter 4 Practical Problems
(v) 12th Bk Chapter 5 Practical Problems
(vi) 12th Bk Chapter 6 Practical Problems
(vii) 12th Bk Chapter 7 Practical Problems
(viii) 12th Bk Chapter 8 Practical Problems
(ix) 12th Bk Chapter 9 Practical Problems
(x) 12th Bk Chapter 10 Practical Problems

There are no questions or exercise content found between page 43 and page 43 as per the provided OCR text.