Question

Question 34.
On 1st May, 2017 Merchant & Co. sold goods to AB & Co. valued at ₹ 500 and drew upon them a bill at 3 months for the amount. AB & Co.
accepted the draft on presentation. When the bill was about to mature. AB & Co. expressed their inability to meet it, and offered to pay Merchant & Co. ₹ 200 in cash and to accept a fresh bill for the balance plus interest at 6% p.a. for 3 months Merchant & Co. agreed to the proposal and bill was renewed. On maturity, the bill was duly met.
Make the entries in the books of both the parties to record the above transactions.

Answer 1

Answer:

Sorry mate......

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Answer 2

Journal Entries for the given transactions in the books of both the parties

Explanation:

                                   In the Books of Merchant and Co.

Journal Entries:

1.5.17        AB and Co. A/c   Dr. Rs.500

                    To Sales A/c               Rs.500

      (Being goods sold to AB and Co. on credit)

                Bills Receivable A/c       Dr. Rs.500

                    To AB and Co. A/c                   Rs.500

      (Being bill drawn upon AB and Co.)

4.8.17           AB and Co. A/c         Dr. Rs.500

                             To B/R A/c                      Rs.500

       (Being bill drawn upon AB and Co. Cancelled)

                    Cash A/c    Dr. Rs.200

                        To AB and Co. A/c     Rs.200

       (Being cash received from AB and Co.)

                     AB and Co. A/c          Dr. Rs. 4.5

                           To Interest A/c                 Rs.4.5

           $[ 300\times 6\%\times \dfrac{3}{12}]$

       (Being Interest due from AB & Co.@6% p.a)

                      Bills Receivable A/c    Dr. Rs.304.50

                            To AB and Co. A/c           Rs.304.50

      (Being new bill drawn upon AB and Co. with Interest)

7.11.17                Cash A/c         Dr. Rs.304.50

                             To B/R A/c            Rs.304.50

      (Being payment received on maturity of the bill)

                 

                                           In the Books of AB and Co.

Journal Entries:

1.5.17        Purchases A/c          Dr. Rs.500

                           To Merchant and Co. A/c    Rs.500

         (Being goods bought from Merchant and Co.)

                Merchant and Co. A/c   Dr. Rs.500

                        To Bills Payable A/c           Rs.500

     (Being bill drawn by Merchant and Co. accepted)

4.8.17        Bills Payable A/c          Dr. Rs.500

                      To Merchant and Co. A/c      Rs.500

      (Being bill cancelled by Merchant and Co.)

                  Merchant and Co. A/c      Dr. Rs.200

                            To Cash A/c                        Rs.200

    (Being cash paid to Merchant and Co.)

                   Interest A/c        Dr. Rs.4.50

                          To Merchant and Co. A/c    Rs.4.50

         (Being interest made due to Merchant and Co. @6% p.a for 3 months)

                  Merchant and Co . A/c        Dr. Rs.304.50

                        To Bills Payable A/c                Rs.304.50

         (Being new bill drawn by Merchant and Co. accepted)

7.11.17             Bills Payable A/c       Dr. Rs.304.50

                              To Cash A/c                Rs.304.50  

       (Being cash paid on maturity of the bill with interest)