Question

Kanika owes ₹ 26,000 to Mansi. Mansi drew a bill for ₹ 21,000 on Kanika for 3 months' period and received the balance of ₹ 5,000 by a crossed cheque. The bill was duly accepted and returned to Mansi.
On the same day, Mansi endorsed Kanika's acceptance to Bansari. On the due date, Bansari informed Mansi that Kanika dishonoured her acceptance and noting charges ₹ 280 were paid.
Mansi then drew a new bill for one month on Kanika including noting charges and interest ₹ 650. On the due date, Kanika honoured her acceptance by cheque.
Prepare: \[\begin{array}{rl} \bullet & \text{(a) Journal entries in the books of 'Mansi'} \\ \bullet & \text{(b) 'Mansi' account in the books of 'Kanika'} \\ \end{array}\]

Hint:

In case of dishonour of a bill, the original bill is reversed and a new bill is drawn. Noting charges are added to the new bill value.

Answer 1

(a) Journal Entries in the Books of Mansi \begin{tabbing} \hspace{6cm} \= \hspace{4cm} \= \kill Journal Entries \> Dr. \> Cr.
\hline \text{Bank Account} \> ₹ 5,000 & \text{To Kanika Account} \> ₹ 5,000
\text{(Being payment made by cheque for balance amount of bill)}
\hline \text{Kanika Account} \> ₹ 21,000 & \text{To Bills Receivable Account} \> ₹ 21,000
\text{(Being bill drawn on Kanika for 3 months)}
\hline \text{Bills Receivable Account} \> ₹ 21,000 & \text{To Bansari Account} \> ₹ 21,000
\text{(Being endorsement of bill to Bansari)}
\hline \text{Bills Receivable Account} \> ₹ 21,000 & \text{To Kanika Account} \> ₹ 21,280
\text{(Being dishonour of bill by Kanika and noting charges paid)}
\hline \text{Kanika Account} \> ₹ 21,280 & \text{To Bills Payable Account} \> ₹ 21,280
\text{(Being new bill drawn on Kanika for 1 month with noting charges)}
\hline \text{Bank Account} \> ₹ 21,930 & \text{To Kanika Account} \> ₹ 21,930
\text{(Being payment received from Kanika on the new bill)}
\hline \end{tabbing} (b) Mansi Account in the Books of Kanika \begin{tabbing} \hspace{6cm} \= \hspace{4cm} \= \kill Mansi Account \> Dr. \> Cr.
\hline \text{Bills Payable Account} \> ₹ 21,000 & \text{To Mansi Account} \> ₹ 21,000
\text{(Being acceptance of bill by Kanika)}
\hline \text{Mansi Account} \> ₹ 5,000 & \text{To Bank Account} \> ₹ 5,000
\text{(Being payment made by cheque for part of the bill)}
\hline \text{Mansi Account} \> ₹ 21,280 & \text{To Bills Payable Account} \> ₹ 21,280
\text{(Being dishonour of bill and noting charges)}
\hline \text{Mansi Account} \> ₹ 21,930 & \text{To Bank Account} \> ₹ 21,930
\text{(Being payment made to Mansi on new bill)}
\hline \end{tabbing} Final Answer: The journal entries and accounts reflect the proper recording of the transactions between Mansi and Kanika, including the dishonoured bill, the new bill drawn, and the payment received.