PPT - Bills of Exchange and Promissory Notes - 6 | Principles and Practice of Accounting - CA Foundation PDF Download

 Page 1


Bills of Exchange and 
Promissory Notes-Part 6/6 
CPT Section A Fundamentals of 
Accountancy Chapter 7 Unit 3 
CA. Ajay Lunawat 
Page 2


Bills of Exchange and 
Promissory Notes-Part 6/6 
CPT Section A Fundamentals of 
Accountancy Chapter 7 Unit 3 
CA. Ajay Lunawat 
RENEWAL OF BILLS 
Page 3


Bills of Exchange and 
Promissory Notes-Part 6/6 
CPT Section A Fundamentals of 
Accountancy Chapter 7 Unit 3 
CA. Ajay Lunawat 
RENEWAL OF BILLS 
Renewal of Bill 
I request you to please 
give me extension on 
the Bill 
Ok, but we need to 
make a fresh bill now 
Sure, please make it for 
2 months period 
But, I will charge you 
interest @ 12 % p.a. on 
this period of 2 months 
I am ready to accept 
the new bill of the 
principle plus interest 
amount 
Page 4


Bills of Exchange and 
Promissory Notes-Part 6/6 
CPT Section A Fundamentals of 
Accountancy Chapter 7 Unit 3 
CA. Ajay Lunawat 
RENEWAL OF BILLS 
Renewal of Bill 
I request you to please 
give me extension on 
the Bill 
Ok, but we need to 
make a fresh bill now 
Sure, please make it for 
2 months period 
But, I will charge you 
interest @ 12 % p.a. on 
this period of 2 months 
I am ready to accept 
the new bill of the 
principle plus interest 
amount 
Accounting Treatment 
• New Bill Receivable A/c Dr.              
 To Old Bill Receivable A/c     
 To Interest   A/c 
In the books of 
Drawer 
• Old Bill Payable A/c  Dr.         
Interest on Renewal of Bill A/c Dr.                 
 To New Bill Payable A/c  
In the books of 
Drawee 
Page 5


Bills of Exchange and 
Promissory Notes-Part 6/6 
CPT Section A Fundamentals of 
Accountancy Chapter 7 Unit 3 
CA. Ajay Lunawat 
RENEWAL OF BILLS 
Renewal of Bill 
I request you to please 
give me extension on 
the Bill 
Ok, but we need to 
make a fresh bill now 
Sure, please make it for 
2 months period 
But, I will charge you 
interest @ 12 % p.a. on 
this period of 2 months 
I am ready to accept 
the new bill of the 
principle plus interest 
amount 
Accounting Treatment 
• New Bill Receivable A/c Dr.              
 To Old Bill Receivable A/c     
 To Interest   A/c 
In the books of 
Drawer 
• Old Bill Payable A/c  Dr.         
Interest on Renewal of Bill A/c Dr.                 
 To New Bill Payable A/c  
In the books of 
Drawee 
Example 
Mohan sold goods to Gupta on 1st September, 
2011 for Rs. 1,600. Gupta immediately accepted 
a three months bill. On due date Gupta 
requested that the bill be renewed for a fresh 
period of two months. Mohan agrees provided 
interest at 9% was paid immediately in cash. To 
this Gupta was agreeable. The second bill was 
met on due date. Give Journal entries in the 
books of Mohan.