Journal Entry for Bills of Exchange

Introduction:
In this journal entry, we will record the transaction between Govindrajan and Hanumanth regarding the acceptance of a bill of exchange. A bill of exchange is a negotiable instrument in writing that orders the payment of a certain sum of money from one party (drawer) to another party (payee) at a specified future date. In this case, Govindrajan accepts a bill of exchange for Rs 1000 from Hanumanth, which is renewed for 4 months at an annual interest rate of 9%.

Journal Entry:
To record this transaction, we need to make the following journal entry:

Date: [Date of the transaction]

1. Accounts Receivable - Hanumanth A/c Dr. [Debit]
To Bills Payable - Govindrajan A/c [Credit]
[To record the acceptance of the bill of exchange by Govindrajan for Rs 1000]

2. Bills Payable - Govindrajan A/c Dr. [Debit]
To Accounts Payable - Hanumanth A/c [Credit]
[To renew the bill of exchange for 4 months]

3. Interest Expense A/c Dr. [Debit]
To Bills Payable - Govindrajan A/c [Credit]
[To record the interest expense on the bill of exchange at the rate of 9% per annum for 4 months]

Explanation:
1. The first journal entry records the acceptance of the bill of exchange by Govindrajan. It increases the accounts receivable of Hanumanth as he becomes the payee, and it decreases the bills payable of Govindrajan as he becomes the drawer.

2. The second journal entry renews the bill of exchange for an additional 4 months. It increases the bills payable of Govindrajan as he is now liable to pay the amount after 4 months, and it increases the accounts payable of Hanumanth as he becomes the payee.

3. The third journal entry records the interest expense on the bill of exchange. It increases the interest expense account as the bill is renewed for a specific period, and it decreases the bills payable of Govindrajan as the interest is accrued.

Conclusion:
In conclusion, the journal entry for the bills of exchange transaction between Govindrajan and Hanumanth involves the acceptance of the bill, renewal for 4 months, and recording the interest expense. These entries are necessary to accurately record the financial impact of the transaction on both parties' accounts.