Class 11 TS Grewal Solutions Accountancy Chapter 12

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Accounting for Bills Exchange – Class 11 Accountancy Chapter 12

Question 1:

Mr. A sold goods to B to the value of ₹. 10,000/- drawing upon him a bill for the amount payable 3 months after date. B accepted the bill and returned it to A. On the due date, A presented the bill to B who honored it. Pass the necessary journal entries in the books of both the parties.

Solution:

Books of Mr. A

Journal

Date Particulars L.F. Dr. (₹) Cr. (₹)
B a/c Dr.
To Sale a/c
(Being goods sold to B)
10,000 10,000
Bills Receivable a/c Dr.
To B a/c
(Being B accepted the bill)
10,000 10,000
Cash a/c Dr.
To Bills Receivable a/c
(Being bill honored on maturity)
10,000 10,000

Books of  Mr.B

Journal

Date Particulars L.F. Dr. (₹) Cr. (₹)
Purchases a/c Dr.
To A a/c
(Being bought from A)
10,000 10,000
A a/c Dr.
To Bills Payable a/c
(Being drawn by A, accepted)
10,000 10,000
Bills payable a/c Dr.
To Cash a/c
(Being acceptance discharged by paying cash)
10,000 10,000

 

Question 2:

A sold goods to B for ₹. 20,000/- on credit of 3 months. He drew on the latter a bill for the amount. The bill was endorsed in favor of C, who got the payment on maturity. Give the journal entries in the books of A.

Solution:

Books of A

Journal

Date Particulars L.F. Dr. (₹) Cr. (₹)
B a/c Dr.
To Sale a/c
(Being goods sold to B)
20,000 20,000
Bills Receivable a/c Dr.
To B a/c
(Being B accepted the bill)
20,000 20,000
C a/c Dr.
To Bills Receivable a/c
(Being B’s acceptance endorsed in favor of C)
20,000 20,000

 

Question 3:

Compute the due dates of the bills in the following cases:

Date of Bill Tenure (Period)
Dec 1, 2017
Apr 30, 2018
Jan 28th, 2018
Nov 23rd, 2017
May 29, 2017
60 days
2 months
1 month
2 months
4 months

 

Solution:

Date of Bill Tenure Calculation Due Date
Dec 1, 2017 60 days 30 Dec + 30 Jan + 3 days of grace Feb 02, 2018
Apr 30, 2018 2 months 2 months from Apr 30, 2018, would be June 30, 2018 + 3 days of grace July 3, 2018
Jan 28th, 2018 1 month 1 month from Jan 28th, 2018 would be Feb 28, 2017 + 3 days of grace March 3, 2018
Nov 23rd, 2017 2 months 2 months from Nov 23rd, 2017, would be Jan 23, 2018 + 3 days of grace
Jan 26, 2018, is a National Holiday. Hence, the due date would fall 1-day before i.e., Jan 25, 2018
May 29, 2017 4 months 4 months from May 29, 2017, would be Sept 29, 2017 + 3 days of grace
Oct 2nd, 2017, but it is a National Holiday. Hence, the due date would fall 1-day before i.e., Oct 1, 2017

 

Question 4

What is the meaning of the Bills of Exchange?

Answer: According to the Negotiable Instruments Act 1881, ‘a bill of exchange is defined as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.’

Question 5

Define the Promissory note.

Answer: According to the Negotiable Instruments Act 1881, a promissory note is defined as ‘an instrument in writing (not being a banknote or a currency note), containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument. However, according to the Reserve Bank of India Act, a promissory note payable to bearer is illegal. Therefore, a promissory note cannot be made payable to the bearer.’

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