8 mark

18. (a) Explain the accounting treatment to handle insolvency case in Bills of Exchange. Or (6) On 12th May, 2020 C sold to D goods for Rs.36,470 and drew upon the latter two bills of exchange; one for Rs.16,470 at one month and the other for Rs.20,000 at three months. D accepted both the bills. On 5th June, 2020 C sent both the bills to his bank for collection on due dates. The first bill was duly met. But due to some temporary financial difficulties, C failed to honour his acceptance for Rs.20,000 on the due date and the bank had to pay Rs.20 as noting charges. However, on 16th August, 2020 it was agreed between C and D that D would immediately pay Rs.8,020 in cash and accept a new bill at three months for Rs.12,480 which included interest for postponement of part payment of the dishonored bill. C immediately sent the new acceptance to its bank for collection on due date. On 1st October, 2020 D approached C offering Rs.12,240 for retirement of his acceptance. C accepted to the request. Pass journal entries for all the above- mentioned transactions and prepare ledger accounts in the books of C. 18. (a) Explain the accounting treatment to handle insolvency case in Bills of Exchange. Or (6) On 12th May, 2020 C sold to D goods for Rs.36,470 and drew upon the latter two bills of exchange; one for Rs.16,470 at one month and the other for Rs.20,000 at three months. D accepted both the bills. On 5th June, 2020 C sent both the bills to his bank for collection on due dates. The first bill was duly met. But due to some temporary financial difficulties, C failed to honour his acceptance for Rs.20,000 on the due date and the bank had to pay Rs.20 as noting charges. However, on 16th August, 2020 it was agreed between C and D that D would immediately pay Rs.8,020 in cash and accept a new bill at three months for Rs.12,480 which included interest for postponement of part payment of the dishonored bill. C immediately sent the new acceptance to its bank for collection on due date. On 1st October, 2020 D approached C offering Rs.12,240 for retirement of his acceptance. C accepted to the request. Pass journal entries for all the above- mentioned transactions and prepare ledger accounts in the books of C