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Accounting for Special Transactions - Bill Of Exchange and Promissory Notes (Old & New) Notes


A draws upon B three Bills of Exchange of Rs.3,000, Rs.2,000 and Rs.1,000 respectively. A week later his first bill was mutually cancelled, B agreeing to pay 50% of the amount in cash immediately and for the balance plus interest Rs.100, he accepted a fresh Bill drawn by A. This new bill was endorsed to C who discounted the same with his bankers for Rs.1,500. The second bill was discounted by A at 5%. This bill on maturity was returned dishonoured (nothing charge being Rs.30). The third bill was retained till maturity when it was duly met.

Give the necessary journal entries recording the above transactions in the books of A.

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Journalize the following in the books of Don:

(i) Bob informs Don that Ray’s acceptance for Rs.3,000 has been dishonoured and noting charges are Rs.40. Bob accepts Rs.1,000 cash and the balance as bill at three months at interest of 10%.Don accepts from Ray his acceptance at two months plus interest @ 12% p.a.

(ii) James owes Don Rs.3,200; he sends Don’s own acceptance in favour of Ralph for Rs.3,160; in full settlement.

(iii) Don meets his acceptance in favour of Singh for Rs.4,500 by endorsing John’s acceptance for Rs.4,450 in full settlement.

(iv) Ray’s acceptance in favour of Don retired one month before due date, interest is taken at the rate of 6% p.a.

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On 1st January, 2016, 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, 2016, B retires his acceptance under rebate of 12% per annum. Record these transactions in the journals of B.

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On 1st January, 1942 J sold goods to N for Rs. 80,000. On the same date J drew a bill on N for the same amount at 3 months. N accepted the bill and returned the same to J.

On 4th January, 1942 J discounted the bill with his bankers at 10% p.a. On the due date bank informed that the bill was dishonored and N requested J to accept Rs. 40,000 immediately and draw upon him a new bill for the remaining amount for 2 months together with interest @ 12 p.a. J agreed on the condition. The second bill was duly honored.

Pass Journal Entries in the books of J and show J’s A/c in the books of N.

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Archana purchased goods from Babita on credit for Rs. 20,000 and accepted a bill drawn by Babita for four months. Babita discounted the bill with her bank for Rs. 19,600. Before the due date, Archana approached Babita with a request to renew the bill. Babita agreed on the condition but Archana should pay Rs. 16,000 with interest of Rs. 120 and accept a new bill for the balance. This arrangement were carried through the new bill was met on due date.

Pass Journal Entries in the books of Archana and also prepare Archana’s account in the books of Babita.

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