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DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : Sreenivasa Rao B.
Designation : Lecturer in CCP
Branch : DCCP
Institute : S.U.V.R&S.R GPW, Ethamukkala
Semester : III
Subject Name : Accountancy II
Subject Code : CCP 302
Major Topic : Bills of Exchange
Duration : 50 minutes
Sub Topic : Bill of exchange – Solution of problems
pertaining to Retirement under rebate and
renewal of bills etc..
Teaching Aids : PPT, ANIMATION
CCP 302 . 47 1
Objectives

On completion of this class, you will be able to


understand :
Entries in the books of drawer and drawee for
retirement of bill before the due date under
rebate and renewal of bills

CCP 302 . 47 2
Recap

In the previous class, we have discussed about


 Meaning of renewal of a bill
 Accounting treatment of renewal of a bill along
with interest

CCP 302 . 47 3
Problem:

 On 1-2-2008 Vijay purchased goods from Rohini for


Rs.10,000 subject to deduction of 10% trade discount.
Vijay accepts a bill for three months for the amount.
On 1-4-2008, Vijay retires his acceptance under rebate of
10% per annum.
Pass necessary entries in the books of Vijay and Rohini

CCP 302 . 47 4
Solution:
Journal of Rohini
Date Particulars L Debit credit
F Rs. Ps Rs. Ps

2008 Vijay account Dr 9,000


Feb.1st To Sales account 9,000

(Being goods sold on credit with a trade


discount of 10%)
---------------------------------------------------
-do- Bills receivable account Dr 9,000
To Vijay account 9,000
(Being the acceptance of Vijay received
for 3 months)
--------------------------------------------------
Apr.1st Cash account Dr 8,925
75
Rebate on bills account Dr
9,000
To Bills receivable account
(Being the amount on bill realized before
the due date and rebate allowed)
CCP 302 . 47 5
Solution:
Journal of Vijay
Date Particulars L Debit credit
F Rs. Ps Rs. Ps

2008 Purchases account Dr 9,000


Feb.1st To Rohini account 9,000
(Being goods purchased on credit at 10%
trade discount)
-----------------------------------------------------
Rohini account Dr 9,000
-do- To Bills payable account 9,000
( Being the acceptance given for 3 months)
------------------------------------------------------
Bills payable account Dr
To Cash account 9,000
Apr.1st To Rebate on bills account 8,925
(Being the amount paid before due date and 75
rebate received at 10% P.A.)
-----------------------------------------------------

CCP 302 . 47 6
Problem: Renewal of bill with interest
1. Jain purchases goods worth Rs.10,000 from Varma
on 1-12-07. Varma draws a bill on Jain for
Rs.10,000 for 3 months, which is accepted by Jain.
Varma discounts the same for Rs. 9,900.
On maturity date Jain fails to honour the bill
and requests Varma to draw a new bill for 3 months
for the original amount plus interest at 10% per
annum plus discounting charges of the original bill.
Varma agrees to the proposal. Make journal
entries in the books of Varma and Jain.
CCP 302 . 47 7
Solution:
Journal of Varma
Date Particulars L Debit credit
F Rs. Rs.
Ps Ps
2007 Jain account Dr
Dec.1st To Sales account 10,000 10,000
(Being the goods sold on credit)
--------------------------------------------------------
Bills receivable account Dr
To Jain account
-do- (Being the acceptance received) 10,000
10,000
-------------------------------------------------------
Bank account Dr
Discount account Dr
To Bills receivable account
9,900
-do- (Being the bill discounted with the bankers) 10,000
100

CCP 302 . 47 8
Solution:
Journal of Varma.. Contd.
Date Particulars L Debit credit
F Rs. Ps Rs. Ps
2008 Jain account Dr 10,000
Mar.4th To Bank account 10,000

(Being the amount paid to bank due to


dishonour of bill by Jain)
-------------------------------------------------------
-do- Jain account Dr 350
To Interest account (10000 x 3/12 x 250
10/100 )
To discount account 100
(Being the interest and discount charges
receivable)
-------------------------------------------------------- 10,350
-do- 10,350
Bills receivable account Dr
To Jain account
(Being the acceptance received for new bill)

CCP 302 . 47 9
Journal of Jain
Date Particulars L Debit credit
F Rs. Ps Rs.
Ps
2007 Purchases account Dr 10,000
Dec.1st To Varma account 10,000
(Being the goods purchased on credit)
------------------------------------------------------
Varma account Dr
-do- To Bills payable account 10,000
(Being the acceptance given) 10,000
------------------------------------------------------
Bills payable account Dr
To Varma account 10,000
Mar.4th (Being the bills dishonoured) 10,000
_______________________________

CCP 302 . 47 10
Journal of Jain Contd..
Date Particulars L Debit credit
F Rs. Ps Rs.
Ps
Mar.4th Interest account Dr
Discount account Dr 275
To Varma account 375
(Being the interest and discount 100
charges payable)
-----------------------------------------------------
Varma account Dr
-do- To Bills payable account
(Being the acceptance given to new 10,375
bill) 10,375
-----------------------------------------------------
-

CCP 302 . 47 11
Summary

 Practised the problems in respect of retirement


of bill and renewal of the bills plus interest with
different accounting treatments

CCP 302 . 47 12
QUIZ

1. What is the due date for a bill of exchange which


is drawn on 27-2-1993 for two months.
a. 30-4-93
b. 26-4-93
c. 30-5-93
d. 29-4-93

CCP 302 . 47 13
Frequently asked questions

Problem: Prasad sold goods to Krishna worth


Rs.10000 and drew a bill on him for the amount at
3 months.
Being unable to meet the bill, Krishna
approached Prasad and requested him to cancel
the bill and draw on him a new bill for Rs.10500 at
3 months including interest. The renewal bill was
honoured on the due date.
Pass journal entries in the books of Prasad
and Krishna.
CCP 302 . 47 14
Assignment

1. Solve problems on renewal of bills and retirement


of bill from you text book

CCP 302 . 47 15