'X' draws on 'Y' a bill for Rs.4,000/- which was duly accepted by
'Y'. 'Y' meet the bill on due date. Show the journal entries in the
books of 'X' , 'Y' and 'Z' under the following cases:-
a) If 'X' retain the bill till due date
b) If 'X' discounted the bill with bank under Rs.100/- discount.
c) If 'X' endorses the bill to his creditor 'Z' in full settlement of
his debts of Rs.4,080/-.
d) If 'X' sends the bill to his banker for collection
Answers
Explanation:
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Explanation:
Due Date of Bill = Date of Bill Drawn + Period + Grace Days
S. No.
Date of Bill Drawn
(1)
Period
(2)
Grace Days
(3)
Due Date
(1 + 2 + 3)
I.
February 01, 2017
2 months
3 days
April 04, 2017
II.
January 31, 2017
3 months
3 days
May 03, 2017
III.
September 30, 2017
2 months
3 days
December 03, 2017
IV.
September 30, 2017
3 months
3 days
January 02, 2018
V.
December 29, 2017
2 months
3 days
March 03, 2018
VI.
December 31, 2017
2 months
3 days
March 03, 2018
VII.
July 15, 2017
30 days
3 days
August 17, 2017
VIII.
January 27, 2016
1 month
3 days
March 01, 2016
a) Before we start with the Journal Entry for Bills of Exchange, let us understand first what a bill of exchange is. A bill of exchange is a negotiable instrument under the Negotiable Instrument Act, 1881. It is an instrument in writing. It contains an unconditional order requiring a certain person to pay a certain sum of money on a stipulated date. There are three parties i.e. Drawer, Drawee, and Payee.
Journal Entry for Bills of Exchange
The drawer is the person who draws or makes the bill and sends it to the drawee or the payer for the acceptance. Once accepted, the bill becomes Bills Receivable for the drawer and Bills Payable for the drawee or payee.
b) Discounting of Bills
A drawer or the seller draws a bill of exchange on the drawee or the purchaser in order to ensure that the latter will pay him the amount due. However, if the holder or the drawer of the bill of exchange needs funds or money before the due date or the maturity date of the bill, he may opt for Discounting of Bills.
c) Date of Bill
Tenure
Calculation
Due Date
(i) December 01, 2017
60 Days
30 (December) + 30 (January) + 3 days of grace
February 02, 2018
(ii) April 30, 2018
2 Months
2 Months from April 30, 2016 would be June 30, 2016 + 3 days of grace
July 03, 2018
(iii) January 28, 2018
1 Month
1 Month from January 28, 2017 would be February 28, 2017 + 3 days of grace
March 03, 2018
(iv) November 23, 2017
2 Months
2 Months from November 23, 2016 would be January 23, 2017 + 3 days of grace
January 26, 2017, but it is a national holiday so, due date would be one day before i.e., January 25, 2017
(v) May 29, 2017
4 Months
4 Months from May 29, 2017 would be September 29, 2017 + 3 days of grace
October 02, 2017 but it is a national holiday so, due date would be one day before i.e., October 01, 2017
Note: Due date of (ii) is mismatched from the book. As per our solution, it is 3rd July, 2018 and it is 3rd July, 2017 as per text book.
Due date of (iii) is mismatched from the book. As per our solution, it is March 03, 2017 and it is March 01, 2017 as per text book.
d) Dishonor and Discharge of Bills
A bill of exchange is a negotiable instrument in writing under the Negotiable Instrument Act, 1881. It is an unconditional order requiring a certain person to pay a certain sum of money on a specific date. There are three parties to a bill of exchange i.e. Drawer, Drawee, and Payee. The drawer is the person who draws or makes the bill and sends it to the drawee or the payer for the acceptance. The bill is also endorsable to another person who then becomes the holder of the bill. On the due date, the holder of the bill presents it to the drawee for receiving the payment. When the drawee makes the payment it is known as the Discharge of Bills.