Entry for Renewal of endorsed bill

Question A.6:
Mr. A draws on Mr. B a bill of exchange for 3 months for Rs. 5000/which Mr. B accepts on 1st January, 2008. Mr. A endorses the bill in
favor of Mr. C. Before maturity, Mr. B approaches Mr. A with the request
that the bill be renewed for a further period of 3 months at fifteen per
cent interest per annum. Mr. A pays the sum to Mr. C on that due date
and agrees to the proposal of Mr. B. Pass journal entries in the books of
Mr. A, assuming that the second bill is duly met.

Entry for Renewal of discounted bill

Question A.7:
On May 20, 2003 Mr. A accepts a 3 months bill drawn by his creditor Mr.
B for Rs. 10,000. On June 23, 2003, Mr. B discounts the same at 6 %
per annum. Mr. A being unable to meet the bill at maturity requests Mr.
B to accept 50% of the bill amount in cash and to draw another bill for 3
months for the balance sum plus interest at 10 % p.a. and Mr. B.
agrees. But before the maturity of second bill, Mr. A becomes insolvent
and is unable to pay any amount whatsoever.
You are required to record these transactions in the Books of Mr. B.
Renewal and then Retirement of Bill
Question A.8:
Mr. David draws two bills of exchange on 1-1-13 for Rs. 6,000 and Rs.
10,000. The bill of exchange for Rs. 6,000 is for two months while the
bill of exchange for Rs. 10,000 is for three months. These bills are
accepted by Mr. Thomas. On 4-3-13 Mr. Thomas requests Mr. David to
renew the first bill with interest at 18% p.a. for a period of two months.
Mr. David agrees to this proposal. On 20-3-13 Mr. Thomas retires the
acceptance for Rs. 10,000, the interest rebate i.e. discount being
Rs.100. Before the due date of the renewed bill, Mr. Thomas becomes
insolvent and only 50 paise in a rupee could be recovered from his
estate. You are to give the journal entries in the books of Mr. David.

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Accommodation Bill discounted and proceeds shared; 2nd bill

made to honor 1st bill
Question B.3:
P drew a bill of Rs. 30,000 on Q who accepts it for mutual
accommodation. The proceeds are to be shared by P and Q in the ratio
of 3:2. The bill is discounted by P for Rs. 29,000 and 2/5 of the proceeds
remitted to Q. Before the due date Q draws another bill for Rs. 40,000 in
order to provide funds to meet the first bill. This bill is discounted for Rs.
38,500 with the help of which the first bill is met and Rs. 5,100 are
remitted to P. Before maturity of the second bill P becomes insolvent
and Q receives a dividend of 40 paise in a rupee in full settlement.
Pass journal entries and also prepare Qs account in the books of P.

Multiple Choice Questions for Practice

1. On 1.1.2005 X draws a bill on Y for Rs.30,000 for 3 months. At
maturity Y requests X to accept Rs.10,000 in cash and for balance
to draw a fresh bill for 2 months together with 12% p.a. interest,
amount of interest will be:
(a) Rs.400
(b) Rs.600
(c) Rs.480
(d) Rs.760
2. X draws a bill on Y for Rs.5,000 for 3 months. Before the due date Y
sends 1/5th of the amount to X. Y requested X to draw a new bill for
the balance amount plus interest @ 12% p.a. for 3 month. Find the
amount of the new bill?
(a) Rs.5,150
(b) Rs.4,140
(c) Rs.4,120
(d) Rs.5,440
3. A draws a bill for Rs.20,000 for 3 months on 1.1.09. Bill was
discounted with a banker who charged Rs.100 as discounting
charges. At maturity the bill returned dishonoured. With what
amount will the bank a/c be credited in the books of A?
(a) Rs.19,000
(b) Rs.20,000
(c) Rs.20,100
(d) Rs.19,900
4. On 1st April, A sold goods worth Rs.10,000 to B. A drew a bill for 3
months. A discounted the bill form the bank at 15% p.a. then the
amount received on account of bill will be:
(a) Rs.10,000
(b) Rs.9,625
(c) Rs.9,000
(d) Rs.8,500

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5. Preeti accepted a 90 days bill of Rs.10,000 drawn by Jeet on

5.2.2006. On 13.3.2006 Preeti wished to retire the bill. Jeet offered
rebate @ 12% p.a.. What is the amount of rebate:
(a) Rs.150
(b) Rs.181
(c) Rs.184
(d) None
6. On 1st January 2006, Vimal sold goods worth Rs.20,000 to Renu and
drew a bill on Renu for 3 months. Renu accepted the bill and
returned it to Vimal who discounted the bill with, bank on 4th
February 2006 @ 15% p.a. The discounting charges will be:
(a) Rs.3,000(b) Rs.750
(c) Rs.500
(d) None
7. A draws a bill on B for Rs.50,000 for 3 months. At maturity. The bill
returned dishonored noting charges Rs.500. 40 paise in a rupee is
recovered form Bs estate. The amount of deficiency to recorded on
insolvency in books of B will be:
(a) Rs.20,200
(b) Rs.30,300 (c) Rs.19,800 (d) Rs.19,000
8. Rajas acceptance to Shyam for Rs. 5,000 is renewed, the interest
being Rs. 100. Hence the bill is of :
a. Rs.4,900 is issued by Shyam to Raja
b. Rs.5,100 is issued by Raja to Shyam
c. Rs.5,100 is issued by Shyam to Raja
d. Rs.4,900 is issued by Raja to Shyam
9. On 1st April, 2002, Anoop received an acceptance for Rs. 25,000
from Deepak. Anoop immediately discounted @ 12% this bill from
the bank who deducted discount Rs. 1,000. Hence the period of the
bill is:
a. 4 months
b. 2 months
c. 3 months
d. 5 months
10. Arun accepted Anand's bill for Rs.1,20,000 on 4-4-2006 for two
months. This was discounted by Anand at 12% p.a. The discounted
proceeds is:
a. Rs.1,17,600 b. Rs.2,400
c. Rs.14,400
d. Rs.3,600

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