Baloo owes Kaloo Rs.8000. Kaloo then draws a bill for Rs. 8000 on Baloo for a period of three months. Baloo accepts and return it to Kaloo.

Baloo owes Kaloo Rs.8000. Kaloo then draws a bill for Rs. 8000 on Baloo for a period of three months. Baloo accepts and return it to Kaloo. Kaloo discounted the bill with his bank @ 12 % p.a. On due date, the bill was dishonoured noting charges amount to Rs. 30. Kaloo then draws a bill for the balance plus interest of Rs. 170. Before the due date of this bill Baloo pays the amount at a discount of Rs. 40 to retire the bill. Pass Journal Entries in the books of Kaloo.

Solution:

Journal Entries in the booms of Kaloo.

Date	Particulars	LF	Debit (Rs)	Credit (Rs)
1.	Bills Receivable A/c …Dr.		8000
	To Baloo's A/c			8000
	[Being the Bill is drawn]
2.	Bank A/c …Dr.		7760
	Discount A/c … Dr.		240
	To Bills Receivable A/c			8000
	[Being the Bill is discounted with the bank]
3.	Baloo's A/c … Dr.		8030
	To Bank's A/c			8030
	[Being the discounted bill is dishonoured along with noting charges]
4.	Baloo's A/c … Dr.		170
	To Interest A/c			170
	[Being Interest is charged on balance amount]
5.	Bills Receivable A/c …Dr.		8200
	To Baloo's A/c			8200
	[Being the New bill is drawn for balance amount along with interest and noting charges]
6.	Cash / Bank A/c … Dr.		8160
	Rebate's A/c … Dr.		40
	To Bills Receivable A/c			8200
	[Being the second bill is retired]