Journal Entry in the Book of Katrak

To record the transaction involving Katrak's acceptance to Patel for ₹ 5000 which was subsequently discharged by Patel, the following journal entry will be made in the book of Katrak:

1. Recognition of the Initial Transaction:
When Katrak accepted Patel's offer for ₹ 5000, the following journal entry would have been made initially:

Debit: Patel's Account (Personal Account)
Credit: Acceptances Payable Account (Liability Account)

This entry would have recorded the increase in Patel's account receivable from Katrak and the corresponding liability of Katrak to pay Patel ₹ 5000 on the maturity date.

2. Discharge of Acceptance by Patel:
When Patel discharges the acceptance by paying the amount to Katrak, the following journal entry should be made:

Debit: Cash Account (Asset Account)
Credit: Patel's Account (Personal Account)

This entry records the decrease in Patel's account receivable and the increase in cash on hand due to the payment made by Patel to Katrak.

3. Mody's Acceptance to Katrak:
If Mody subsequently accepts a similar amount payable to Katrak, the following journal entry should be made:

Debit: Mody's Account (Personal Account)
Credit: Acceptances Receivable Account (Asset Account)

This entry records the increase in Mody's account payable to Katrak and the corresponding asset of Katrak, which is the amount receivable from Mody on the maturity date.

Overall, these journal entries accurately record the initial transaction between Katrak and Patel, the discharge of the acceptance by Patel, and the subsequent acceptance by Mody. It ensures that the financial transactions are properly recorded in Katrak's books, providing an accurate representation of their financial position.