Minal draws a bill on Usha for Rs. 5,000 at 3 months. Usha accepts the bill and return to Minal. Minal discounted the bill @ 12 % p.a. with the bank. On Maturity Usha finds herself unable to make payment of the bill and requested Minal to renew the bill. Minal accepts the proposal on the condition that Usha should Pay Rs. 2,000 in cash and accept a new bill at one month along with interest at 10% p.a. These arrangements were carried through. Usha retires the bill by paying Rs. 3015/- Pass Journal Entries in the books of Usha.

Minal draws a bill on Usha for Rs. 5,000 at 3 months. Usha accepts the bill and return to Minal. Minal discounted the bill @ 12 % p.a. with the bank. On Maturity Usha finds herself unable to make payment of the bill and requested Minal to renew the bill. Minal accepts the proposal on the condition that Usha should Pay Rs. 2,000 in cash and accept a new bill at one month along with interest at 10% p.a. These arrangements were carried through. Usha retires the bill by paying Rs. 3015/- Pass Journal Entries in the books of Usha.

Journal Entries in the Books of Usha

Below is the step-by-step solution and explanation for the bill of exchange transactions between Minal and Usha.

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
(1)	Minal A/c ... Dr.     To Bills Payable A/c (Being bill drawn by Minal accepted for 3 months)		5,000	5,000
(2)	Bills Payable A/c ... Dr.     To Minal A/c (Being our acceptance cancelled for renewal upon maturity)		5,000	5,000
(3)	Minal A/c ... Dr.     To Cash/Bank A/c (Being part payment made in cash as per condition)		2,000	2,000
(4)	Interest A/c ... Dr.     To Minal A/c (Being interest charged by Minal on the balance amount of Rs. 3,000 for 1 month @ 10% p.a.)		25	25
(5)	Minal A/c ... Dr.     To Bills Payable A/c (Being new bill accepted along with interest for one month)		3,025	3,025
(6)	Bills Payable A/c ... Dr.     To Cash/Bank A/c     To Rebate on Bills A/c (Being bill retired before maturity and rebate received)		3,025	3,015 10

Detailed Explanation & Working Notes

Explanation: Discounting the Bill
The fact that Minal discounted the bill with the bank @ 12% p.a. is recorded only in Minal's books. Since Usha (the drawee) is not involved in this specific transaction, no entry is passed in the books of Usha for the act of discounting.

Note 1: Calculation of Interest
Original Bill Amount: Rs. 5,000
Less: Cash Payment: Rs. 2,000
Balance Outstanding: Rs. 3,000

Interest is calculated on the balance outstanding for the period of the new bill (1 month) at 10% p.a.
$$ \text{Interest} = 3000 \times \frac{10}{100} \times \frac{1}{12} = 25 $$
Therefore, the interest amount is Rs. 25.

Note 2: New Bill Amount
The new bill includes the balance outstanding plus the interest charged by Minal.
New Bill Amount = Balance Amount + Interest = 3,000 + 25 = Rs. 3,025.

Note 3: Retirement of the Bill (Rebate)
Retiring a bill means paying it before the due date. Usha pays Rs. 3,015 to settle a bill of Rs. 3,025.
Rebate (Discount Received) = New Bill Amount - Amount Paid
Rebate = 3,025 - 3,015 = Rs. 10.
This Rs. 10 is a financial gain for Usha, hence it is credited to the Rebate on Bills (or Discount Received) Account.