VELAMMAL BODHI SCHOOL OF COMMERCE, PONNERI

ONLINE CLASS NOTES – ACCOUNTANCY (20.01.2022)

Format journal entries

What if the maturity date falls on a public holiday – previous working date

23.12.2021 – 1month

26.01.2022 – 25.01.2022

What if the maturity date falls on abnormal holidays – Next working date

20.01.2022 – 2 months

23.03.2022 (holiday due to strike) – 24.03.2022

Bill was retained by the Drawer (A):

Journal Entries In the books of A (Drawer)

1. Good sold to B Rs.10000

[sales (stock) – Asset (D) – decrease – Credit]

[B (debtor) – Asset (D) – increase – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 B’s A/c Dr. 10000
Jan 20 To sales a/c 10000
(goods sold on credit to B)

2. Bill was created and accepted

[bills receivable – Asset (D) – increase – Debit]

[B (debtor) – asset (D) – Decrease – Credit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 Bills receivable a/c dr. 10000
Jan 20 To B’s a/c 10000
(bill was created and accepted)

3. Honoring of bill

[cash – asset (D) – increase – Debit]

[bill receivable – asset (D) – Decrease – Credit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 Cash a/c dr. 10000
Apr 23 To Bills receivable a/c 10000
(bill was honoured0
Journal entries In the books of B (debtor-Drawee)

1. Good purchased from A Rs.10000

[purchase (stock) – asset (D) – increase – Debit]

[A (creditor) – Liab (C) – increase – Credit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 Purchase a/c dr. 10000
Jan 20 To A’s a/c 10000
(goods purchased on credit0

2. Bill was created and accepted

[bills payable - Liab (C) – increase – Credit]

[A (creditor) - Liab (C) – decrease – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 A’s a/c dr. 10000
Jan 20 To Bills payable a/c 10000

3. Honoring of bill

[cash – Asset (D) – decrease – Credit]

[bills payable – liab (c ) – decrease – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

2022 Bills payable a/c dr. 10000
Apr 23 To cash a/c 10000

DISCOUNTING OF BILL (only in the books of drawer)

Discounting of bill means that the bill can be handed over to bank in case of any emergency before
the maturity of the bill and get discounted valued from bank. Later the bank will collect the bill amount
from the debtor on maturity date. Only the holder of the bill can discount it with the bank. This
transaction doesn’t appear in the books of Debtor.

[bank – Asset (D) – increase – Debit]

[bills receivable – asset (D) – decrease – Credit]

[discount on bill – expense (D) – increase – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

Bank a/c dr. Xxx
Discount on bill a/c dr. Xxx
To Bills receivable a/c Xxx
(bill was discounted with bank)
ENDORSEMENT OF BILL (in the books of holder of the bills)

it means transferring bill to somebody (creditor).

[bills receivable - asset (D) – decrease – Credit]

[creditor – Liab (C ) – decrease – Debit]

[discount received – revenue (C ) – increase – Credit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

Creditor a/c dr. Xxx
To bills receivable a/c xxx
To discount received (if any)
(bill was endorsed to the creditors)

DISHONOUR OF BILL
IN THE BOOKS OF DRAWER
If the bill was retained by the Seller or sent to bank for collection

Date Particulars LF Debit (Rs.) Credit (Rs.)

Debtor’s a/c dr. Xxx
To Bills receivable a/c xxx
(bill was dishonoured)
It is just reversal of the bill creation entry

If the bill was discounted by bank

[bank – asset (D) – decrease – Credit]

[debtor – asset (D) – increase – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

Debtor a/c dr. Xxx
To bank a/c Xxx
(the discounted bill was dishonoured)

Bills receivable a/c dr.

To bank a/c

Debtor a/c dr.

To bills receivable a/c

if the bill was endorsed to a creditor (endorsee)

[debtor – asset (D) – increase – Debit]

[creditor – Liab (C ) – increase – Credit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

Debtor a/c dr. Xxx
To Creditor a/c Xxx
(the endorsed bill was dishonoured)

Bills receivable a/c dr.

To Creditor a/c

Debtor a/c dr.

To bills receivable a/c

IN THE BOOKS OF DRAWEE

Only one entry for dishonor for all the above cases.

[creditor – Liab (C ) – increase – Credit]

[bills payable – liab (c ) – decrease – Debit]

Date Particulars LF Debit (Rs.) Credit (Rs.)

Bills payable a/c dr. Xxx
To creditor (drawer) a/c Xxx
(the bills was dishonoured)