accommodation bill helps both the parties to the instrument to temporarily

accommodation bill helps both the parties to the instrument to temporarily raise the necessary funds from discounting institutions. Illustaration Ashu and Mudit were in need of funds. On October , Ashu drew upon a bill for Rs. , for months. Mudit accepted the bill and returned to Ashu. Ashu got it discounted at % from Bank same day. Half of the amount were remitted to Mudit. On the due date Ashu sent the required sum to Mudit, who met the bill. Journalise the transactions in the books of Ashu and Mudit. Books of Ashu Oct. Bills Receivable A/c , To Mudit’s A/c , (Mutual accommodation bill receipts from Mudit) Oct. , Discount A/c To Bill Receivable A/c , (Bill discounted from bank) Oct. Mudit’s A/c , To Cash A/c , . To Discount A/c . (Half the proceeds remitted to Mudit) Oct. Mudit’s A/c , To Cash A/c , (Half amount of the bill sent to Mudit to enable him to meet it) Books of Mudit Amount Amount Oct. Ashu’s A/c , To Bills Payable A/c , (Mutual Accommodation bill accepted) Oct. Cash A/c , . Discount A/c . To Ashu’s A/c , (half amount of Discounted Bill received from Ashu) Dec. Cash A/c , To Auhu’s A/c , (Amount retained by Ashu now received from him) Dec. Bill Payable A/c , , (Acceptance honoured) Illustration Rohan and Rohit were both in need to temporary accommodation. On November , , Rohan accepted Rohit draft for Rs. , for months and Rohit accepted Rohan draft for Rs. , for months. The both bills were discounted at the respected banks for Rs , and Rs. , . Before maturity of the bill Rohit sent Rs. , to Rohan for difference in accommodation bill. Rohan and Rohit met his acceptance on the due date. Records the transaction in the journal of Rohan and Rohit. Books of Rohan Nov. Rohit’s A/c , To Bills Payable A/c , (Rohan accepted bill accommodation) Nov. Bill Receivable A/c To Rohit’s A/c (Accommodated bill received) Nov. , Discount A/c To Bill Receivable A/c (Bill discounted by bank) Feb. Cash A/c , To Rohit’s A/c , (Cash received for meet the bill) Feb. Bill Payable A/c , , (Bill met on maturity) Books of Rohit Nov. Rohan’s A/c To Bills Payable A/c (Rohit accepted bill accommodation) Nov. Bill Receivable A/c , To Rohan’s A/c , (Accommodated bill received) Nov. , Discount A/c To Bill Receivable A/c , (Bill discounted by bank) Feb. Rohan’s A/c , To cash A/c , (Sent cash to Rohan) Feb. Bill Payable A/c (Bill met on due date) Key Terms Introduced in the Chapter