In the books of Kashinath : Maur
ra
(34) Narendra accepted a bill of 8,000 drawn by Surendra at 3 months,
Surendra got the bill discounted with Bank for 7,800.
Before the due date, Narendra approached Surendra for renewal of the bill.
It was agreed to pay 6,000 immediately together with interest on the remaining
amount @ 10% p.a for 3 morrths and for the balance Narendra should accept a new
bill for 3 months.
These arrangements were carried through.
But afterwards Narendra became insolvent and only 25% of the amount could be
recovered from his estate.
Pass necessary Journal Entries in the books of Narendra.
(October 2010)
Narendra's Journal Total = 28,100/-; Deficiency = 1,500/-
please solve.
Answers
the Journal Entries made in the books of Narendra to record the transactions involving the bill of 8,000 and the subsequent arrangements made with Surendra
To Find:
to pass necessary Journal Entries in the books of Kashinath: Maurra (Narendra) for the given scenario.
Given:
the following information is given to solve the problem:
Narendra accepted a bill of 8,000 from Surendra at 3 months
Surendra got the bill discounted with the bank for 7,800
Before the due date, Narendra approached Surendra for renewal of the bill
It was agreed to pay 6,000 immediately together with interest on the remaining amount @ 10% p.a for 3 months
For the balance, Narendra should accept a new bill for 3 months
These arrangements were carried through
But afterwards Narendra became insolvent and only 25% of the amount could be recovered from his estate
Solution:
In this situation, we need to make journal entries in the books of Narendra to record the transactions involving the bill of 8,000 and the subsequent arrangements made with Surendra. The journal entries would be as follows:
On accepting the bill of 8,000 from Surendra:
Debit: Account Receivable (Surendra) 8,000
Credit: Bank 8,000
On Surendra getting the bill discounted with the bank:
Debit: Bank 7,800
Credit: Account Receivable (Surendra) 7,800
On agreeing to pay 6,000 immediately and interest on the remaining amount:
Debit: Account Receivable (Surendra) 6,000
Credit: Cash 6,000
Debit: Interest Expense (on remaining amount) 600 (2,200 x 10% x 3/12)
Credit: Account Receivable (Surendra) 600
On accepting a new bill for 3 months for the balance:
Debit: Account Receivable (Surendra) 2,200
Credit: Account Payable (Surendra) 2,200
On Narendra becoming insolvent and only 25% of the amount could be recovered from his estate
Debit: Loss on Insolvency 1,500
Credit: Account Receivable (Surendra) 1,500
The total of the journal entries will be 28,100 and the deficiency will be 1500.
It's important to note that this is a representation of how the journal entries would be made in Narendra's books and it's not a conclusive representation of the actual scenario.
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