Question No 34 Chapter No 16 - T.S. Grewal 11 Class

Question No 34 Chapter No 16

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.

The solution of Question No 34 Chapter No 16:-

Books of Merchant & Co.
Date	Particulars		L.F.	Debit	Credit
2017
May 01	AB & Co	Dr.		500
	To Sales A/c				500
	(Being Goods were sold to AB & Co)
May 01	Bills Receivable A/c	Dr.		500
	To AB & Co				500
	(Being AB & Co’s acceptance was received)
Aug.04	AB & Co	Dr.		500
	To Bills Receivable A/c				500
	(Being AB & Co’s acceptance was cancelled)
Aug.04	Cash A/c	Dr.		200
	To AB & Co				200
	(Being Cash received from AB & Co )
Aug.04	AB & Co	Dr.		4.50
	To Interest A/c				4.50
	(Being Interest-due from AB & Co at 6% p.a. for 3 months)
	Working Note: 300 × 6% × 3/12 = Rs 4.50
Aug.04	Bills Receivable A/c	Dr.		304.50
	To AB & Co				304.50
	(Being AB & Co’s acceptance was received including the interest for 3 months)
Nov.07	Cash A/c	Dr.		304.50
	To Bills Receivable A/c				304.50
	(Being Payment received on maturity the bill)

Books of AB & Co
Date	Particulars		L.F.	Debit	Credit
2017
May 01	Purchases A/c	Dr.		500
	To Merchant & Co				500
	(Being goods were bought from Merchant & Co)
May 01	Merchant & Co	Dr.		500
	To Bills Payable A/c				500
	(Being Bill drawn by Merchant & Co was accepted)
Aug.04	Bills Payable A/c	Dr.		500
	To Merchant & Co				500
	(Being Bill got cancelled)
Aug.04	Merchant & Co	Dr.		200
	To Cash A/c				200
	(Being Cash received from AB & Co )
Aug.04	Interest A/c	Dr.		4.50
	To Merchant & Co				4.50
	(Being Interest-due from AB & Co at 6% p.a. for 3 months)
	Working Note: 300 × 6% × 3/12 = Rs 4.50
Aug.04	Merchant & Co	Dr.		304.50
	To Bill Payable A/c				304.50
	(Being new bill drawn by Merchant & Co was accepted)
Nov.07	Bills Payable A/c	Dr.		304.50
	To Cash A/c				304.50
	(Being Payment received on maturity the bill)

Bill of exchange (BOE): Meaning and Examples

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Also, Check out the solved question of previous Chapters: –

- Chapter No. 1 – Introduction to Accounting
- Chapter No. 2 – Basic Accounting Terms
- Chapter No. 3 – Theory Base of Accounting, Accounting Standards and International Financial Reporting Standards(IFRS)
- Chapter No. 4 – Bases of Accounting
- Chapter No. 5 – Accounting Equation
- Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
- Goods and Services Tax(GST)
- Chapter No. 7 – Origin of Transactions – Source Documents and Preparation of Vouchers
- Chapter No. 8 – Journal
- Chapter No. 9 – Ledger
- Chapter No. 10 – Special Purpose Books I – Cash Book
- Chapter No. 11 – Special Purpose Books II – Other Books
- Chapter No. 12 – Bank Reconciliation Statement
- Chapter No. 13 – Trial Balance
- Chapter No. 14 – Depreciation
- Chapter No. 15 – Provisions and Reserves
- Chapter No. 16 – Accounting for Bills of Exchange
- Chapter No. 17 – Rectification of Errors
- Chapter No. 18 – Financial Statements of Sole Proprietorship
- Chapter No. 19 – Adjustments in preparation of Financial Statements
- Chapter No. 20 – Accounts from incomplete Records – Single Entry System
- Chapter No. 21 – Computers in Accounting
- Chapter No. 22 – Accounting Software – Tally
- Chapter No. 5 – Accounting Equation
- Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
- Goods and Services Tax(GST)
- Chapter No. 8 – Journal
- Chapter No. 9 – Ledger
- Chapter No. 10 – Special Purpose Books I – Cash Book