Archana purchased goods from Babita on credit for Rs. 20,000. On next day Archana paid Rs. 10,000 to Babita and accepted a bill drawn by Babita for the balance amount for four months. Babita discounted the bill with her bank for Rs. 9600/-. Before the due date Archana approached Babita with a request to renew the Bill. Babita agreed with the condition that Archana should pay Rs. 6000 along with interest of Rs. 120 and accept a new bill for the balance. These arrangements were duly carried out. New bill is met on the due date. Pass journal entries in the books of Archana.

Archana purchased goods from Babita on credit for Rs. 20,000. On next day Archana paid Rs. 10,000 to Babita and accepted a bill drawn by Babita for the balance amount for four months. Babita discounted the bill with her bank for Rs. 9600/-. Before the due date Archana approached Babita with a request to renew the Bill. Babita agreed with the condition that Archana should pay Rs. 6000 along with interest of Rs. 120 and accept a new bill for the balance. These arrangements were duly carried out. New bill is met on the due date. Pass journal entries in the books of Archana.

Journal Entries in the Books of Archana

Below is the step-by-step solution and journal entries for the transactions between Archana and Babita.

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
(1)	Purchases A/c ... Dr.     To Babita's A/c (Being goods purchased from Babita on credit)		20,000	20,000
(2)	Babita's A/c ... Dr.     To Cash/Bank A/c     To Bills Payable A/c (Being part payment made in cash and bill accepted for the balance amount for 4 months)		20,000	10,000 10,000
(3)	Bills Payable A/c ... Dr.     To Babita's A/c (Being our previous acceptance cancelled for renewal)		10,000	10,000
(4)	Interest A/c ... Dr.     To Babita's A/c (Being interest due on the renewed bill balance)		120	120
(5)	Babita's A/c ... Dr.     To Cash/Bank A/c (Being part payment made along with interest as per renewal condition)		6,120	6,120
(6)	Babita's A/c ... Dr.     To Bills Payable A/c (Being new bill accepted for the remaining balance)		4,000	4,000
(7)	Bills Payable A/c ... Dr.     To Cash/Bank A/c (Being new bill duly met on the due date)		4,000	4,000

Detailed Explanation & Working Notes

Note 1: Discounting the Bill
The problem states that Babita discounted the original bill with her bank for Rs. 9,600. Because Archana is the drawee (acceptor) and not the drawer, this transaction occurs strictly between Babita and the bank. Therefore, no entry is recorded in Archana's books for the discounting.

Note 2: Cancellation of the Old Bill
Before an old bill can be renewed, the existing liability (Bills Payable) must be cancelled. The original bill amount was Rs. 10,000. When it is cancelled, the Bills Payable account is debited, and Babita's account is credited back to reflect the reinstated liability.

Note 3: Part Payment and Interest
Upon renewal, Archana pays a part of the principal (Rs. 6,000) and the agreed interest (Rs. 120).
Total cash paid = Principal part payment + Interest = 6,000 + 120 = Rs. 6,120.

Note 4: New Bill Amount
Original Bill Value = Rs. 10,000
Less: Principal Part Payment = Rs. 6,000
Balance for the New Bill = 10,000 - 6,000 = Rs. 4,000.
(Since the interest was paid in cash, it does not get added to the new bill amount).