Bill of Exchange

The journal entries to be recoded in the books of the drawer and the acceptor under all the four cases have been summarised below. Illustration Amit sold goods for Rs. , to Sumit on credit on Jan , . Amit drew a bill of exchange upon Sumit for the same amount for three months. Sumit accepted the bill and returned it to Amit. Sumit met his acceptance on maturity. Record the necessary journal entries under the following circumstances: (i) Amit retained the bill till the date of its maturity and collected directly (ii) Amit discounted the bill @ % p.a from his bank (iii) Amit endorsed the bill to his creditor Ankit (iv) Amit retained the bill and on March, Amit sent the bill for collection to its bank. On April , bank advice was received. Solution Books of Amit (i) When the bill was retained till its maturity. Jan Sumit’s A/c To Sales A/c (Sold goods to Sumit’s on credit) Jan Bills Receivable A/c To Sumit’s A/c (Received Sumit’s acceptance payable after three months) Apr. (Sumit met his acceptance on maturity) (ii) When the bill was discounted from the book. Amount Amount Jan Sumit’s A/c To Sales A/c (Sold goods to Sumit’s) Jan Bills Receivable A/c To Sumit’s A/c (Received Sumit’s acceptance three months) Jan Bank A/c , Discount A/c (Sumit’s acceptance discounted with the bank) (iii) When Amit endorsed the bill in favour of his creditor Ankit. Sumit’s A/c To Sales A/c (Sold goods to Sumit’s on credit) Bills Receivable A/c To Sumit’s A/c (Received Sumit’s acceptance for three months) Ankit’s A/c (Sumit acceptance endorsed in favour of Ankit) (iv) When the bill was sent for collection by Amit to the bank. Amount Amount Sumit’s A/c To Sales A/c (Sold goods to Sumit’s on credit) Bills Receivable A/c To Sumit’s A/c (Received Sumit’s acceptance payable after three months) Mar. Bills Sent for Collection A/c (Bills sent for collection) Apr. To Bills sent for collection A/c (Bills sent for collection collected by the bank) The following journal entries will be made in the books of Sumit under all the four circumstances: In the books of Sumit Purchases A/c To Amit’s A/c (Purchases goods from Amit on credit) Amit’s A/c To Bill’s Payable A/c (Accepted bill drawn by Amit payable after three months) Apr. Bills payable A/c (Met acceptance maturity) Illustration On March , Ramesh sold goods for Rs. , to Deepak on credit. Deepak accepted a bill of exchange drawn upon him by Ramesh payable after three months. On April, Ramesh endorsed the bill in favour of his creditor Poonam in full settlement of her debt of Rs. , . On May , Poonam discounted the bill with her bank @ % p.a. On the due date Deepak met the bill. Record the necessary journal entries in the books of Ramesh, Deepak, Poonam. Books of Ramesh Mar. Deepak A/c , To Sales A/c , (Sold goods to Deepak on credit) Mar. Bills Receivable A/c , To Deepak A/c , (Received Deepak’s acceptance for three months) Apr. Poonam’s A/c , , To Discount Received A/c (Bill endorsed in favour of Poonam in full settlement of her debt of Rs. , ) Book of Deepak Mar. Purchases A/c , To Ramesh A/c , (Sold goods to Deepak on credit) Mar. Ramesh’s A/c , To Bills Payable A/c , (Accepted Ramesh’s draft payable after three months) Jun. Bills Payable A/c , , (Met the acceptance in favour of Ramesh on maturity) Books of Poonam Amount Amount Mar. Bills Receivable A/c , Discount Allowed A/c To Ramesh’s A/c , (Ramesh endorsed Deepak’s acceptance in our favour for discharge his dept of Rs. , in full settlement) Mar. , Discount Allowed A/c , (Biils receivable encashed on maturity)