Mahesh draws a bill on Nilesh for 5,000 at 3 months. Nilesh accepts it and returns it to Mahesh. The bill is discounted by Mahesh for * 4,925 with his bank. On maturity Nilesh finds himself unable to pay the bill and requests Mahesh to renew it, Mahesh accepts the request and draws a new bill at one month for * 5,050 (including interest) Mahesh deposits this new bill with his bank for collection. On the due date, Nilesh honours the bill. Give Journal Entries and show Nilesh's Alc in the books of Mahesh.
Answers
In the books of Mahesh following journal entries will be passed:
Particular. debit. credit.
Bills receivable A/c. 5000
Nilesh. A/c. 5000
(Bills drawn and accept it )
Bank A/c. 4925
Discount A/c. 75
Bills receivable A/c 5000
(being bills discounted at bank )
Nilesh A/c. 5000
Bank A/c. 5000
(being bills dishonoured on maturity nilesh will be at list of debtor again)
Bills receivable A/c. 5050
Nilesh. A/c. 5000
Interest A/c. 50
(being bills again draw and accept it)
No entry
(no entry passed on due date )
Nilesh A/c
Particular. Amt. Particular. Amt
To Bills By bills
Receivable 5000 Receivable. 5000
To Bills By Bank. 5000
Receivable 5000
10,000. 10,000