KS Academy Classroom Material – Bills of Exchange

Accounting for Bills of Exchange

1. Arun and Anand were friends and in need of funds. On 1st Jan., Arun drew a bill for Rs.2,00,000 for 3 months on
Anand. On 4th Jan. Arun got the bill discounted at 10% p.a. and remitted half of the proceeds to Anand. At maturity,
Anand could not meet the bill, instead, Arun accepted Anand's bill for Rs.1,20,000 on 4th April for two months. This
was discounted by Anand at 12% p.a. Out of this, Rs.19,600 was paid to Arun after deducting Rs.400 discounting
charges. Due to financial crisis, Arun became insolvent and the bill drawn on him was dishonoured and his estate
paid 50%. Days of grace for discount purposes may be ignored. Give journal entries in the books of Arun. Also prepare
Anand's Account in Arun's books and Arun's Account in the books of Anand.
[C.A. (Foundation) Dec. 1993]
2. On 1st Jan, A drew and B accepted a bill at three months for Rs.2,000. On 4th Jan, A discounted the bill at 15% p.a.
and remitted half the proceeds to B. On 1st Feb., B drew and A accepted a bill at four months for Rs.1,500. On 4th
Feb. B discounted the bill at 15% p.a. and remitted half the proceeds to A. A and B agreed to share the discounts
equally. At maturity, A met his acceptance but B failed to meet and recourse was had to A. A drew and B accepted
a new bill at three months for the amounts of the original bill plus interest at 18% p.a. On July 1, B became a bankrupt
and paid to his creditors only 50 paise in the rupee. Record these transactions in A's journal and prepare B's Account.
[C.A. (Foundation) Nov, 1994)
3. Mr.David draws two bills of exchange on 1st Jan, for Rs.6,000 and Rs.10,000. The bills of exchange for Rs.6,000 is for
two months while the bill of exchange for Rs.10,000 is for three months. These bills are accepted by Mr.Thomas. On
4th March Mr.Thomas requests Mr.David to renew the first bill with interest at 18% p.a. for a period of two months.
Mr.David agrees to this proposal. On 20th March, Mr.Thomas retires the acceptance for Rs.10,000, the interest
rebate i.e. discount being Rs.100. Before the due date of the renewed bill, Mr.Thomas becomes insolvent and only
50 paise in a rupee could be recovered from the estate. You are to required to give the journal entries in the books
of Mr David.
[C.A. (Foundation) Nov, 1995]
4. On 1st January, A sells goods for Rs.10,000 to B and draws a bill at three months for the amount. B accepts it and
returns it to A. On 1st March, B retires his acceptance under rebate of 12% per annum. Record these transactions in
the journals of A and B.
[C.A. (Foundation) May 1997]
5. Shubham draws on Rajendra a bill for Rs.45,000 on 1st June, 20X1 for 3 months. Rajendra accepts the bill and sends
it to Shubham who gets it discounted for Rs.44,100. Shubham immediately remits Rs.14,700 to Rajendra. On the
due date Shubham, being unable to remit the amount due, accepts a bill for Rs.63,000 for three months which is
discounted by Rajendra for Rs.61,650. Rajendra sends Rs.11,100 to Shubham. On the due date Shubham becomes
insolvent, his estate paying forty paise in the rupee. Give Journal Entries in the books of Shubham and Rajendra.
[C.A. (Foundation) May 1999]
6. On 1st July, 20X1 G drew a bill for Rs.80,000 for 3 months on H for mutual accommodation. H accepted the bill of
exchange.
G had purchased goods worth Rs.81,000 from J on the same date. G endorsed H's acceptance to J in full settlement.

Bills of Exchange 1 CA - FOUNDATION

KS Academy Classroom Material – Bills of Exchange

On 1st September, 20X1 J purchased goods worth Rs.90,000 from H.J. endorsed the bill of exchange received from
G to H and paid Rs.9,000 in full settlement of the amount due to H.
On 1st October, 20X1 H purchased goods worth Rs.1,00,000 from G. He paid the amount due to G by cheque.
Give the necessary Journal Entries in the books of H.
[CA (Foundation) May 2000)
7. Record the following transactions in the Journals of Ram and Hari:
Ram sells goods for Rs.1,00,000 to Hari on 1st January, 20X1 and on the same day draws a bill on Hari at three
months for the amount. Hari accept it and returns it to Ram, who discounts it on 4th January, 20X1 with his bank at
12% per annum. The acceptance is dishonoured on due date and the bank pays Rs.250 as noting charges.
[CA (Foundation) May 2001]
8. Anil draws a bill for Rs.9,000 on Sanjay on 5th April 20X3 for 3 months, which Sanjay returns it to Anil after accepting
the same. Anil gets it discounted with the bank for Rs.8,820 and remits one-third amount to Sanjay.
On the due date Anil fails to remit the amount due to Sanjay, but he accepts a bill for Rs.12,600 for three
months, which Sanjay discount it for Rs.12,330 and remits Rs.2,220 to Anil. Before the maturity of the renewed bill
Anil becomes insolvent and only 50% was realised from his estate on 15th October, 20X3.
Required: Pass necessary Journal entries for the above transactions in the books of Anil.
[CA (PE-I) Nov. 2004]

Bills of Exchange 2 CA - FOUNDATION