Question

On 15^th March, 2023 Y accepted a bill drawn upon him by X for four months for Rs. 10,000. X discounted the bill on 15^th April, 2023 at 18% p.a. from his bank and Y met the bill on maturity. Give the Journal Entries in the books of X and Y.

Hint:

When bills are discounted, the bank deducts interest in advance. Ensure the discount is recorded as an expense.

Answer 1

The following journal entries will be recorded in the books of X and Y:

In the books of X:

\(Date\)	Particulars	Debit (Rs.)	Credit (Rs.)
15th March 2023	Bills Receivable A/c Dr. To Y’s A/c (Being bill drawn and accepted by Y)	10,000	10,000
15th April 2023	Bank A/c Dr. Discount A/c Dr. To Bills Receivable A/c (Being bill discounted at 18% p.a. for 4 months)	9,850 150	10,000
15th July 2023	No Entry (Bill met by Y)

In the books of Y:

\(Date\)	Particulars	Debit (Rs.)	Credit (Rs.)
15th March 2023	X’s A/c Dr. To Bills Payable A/c (Being bill accepted in favor of X)	10,000	10,000
15th July 2023	Bills Payable A/c Dr. To Cash/Bank A/c (Being bill honored on maturity date)	10,000	10,000