Journal Entry for Bills of Exchange in the Books of Don

Assuming Don is the creditor and James is the debtor, the journal entry for the given transaction is as follows:

Date | Particulars | L.F. | Debit | Credit
---- | ---------- | --- | ----- | ------
XX/XX/XXXX | James A/C Dr. | XXX | 3,200 |
| To Bills Receivable A/C | XXX | | 3,160
| To Discount A/C | XXX | | 40

Explanation of Journal Entry

The above journal entry is recorded in the books of Don for the given transaction involving bills of exchange. The following is the explanation for the different components of the journal entry:

- Date: The date on which the transaction is recorded in the books of Don.
- Particulars: The accounts involved in the transaction.
- L.F.: The ledger folio where the transaction is posted.
- Debit: The amount debited in the account.
- Credit: The amount credited in the account.

Debit Entry
- James A/C: James is the debtor who owes Rs. 3,200 to Don. Hence, his account is debited with Rs. 3,200.

Credit Entry
- Bills Receivable A/C: The acceptance received from James for Rs. 3,160 is recorded in the Bills Receivable account. Bills Receivable is an asset account and hence, it is credited with Rs. 3,160.
- Discount A/C: The difference between the amount owed by James (Rs. 3,200) and the amount received through acceptance (Rs. 3,160) is Rs. 40. This is the discount allowed by Don for the early payment through bills of exchange. Hence, the Discount account is credited with Rs. 40.

In conclusion, the above journal entry records the transaction involving bills of exchange in the books of Don.

Bills payable a/c __Dr. 3,160
Discount a/c __Dr. 40
To james. 3200