Book-Keeping and Accountancy · Ch 7 — Bills of Exchange
Endorsement of the Bill to a Creditor
Endorsement of the Bill to a Creditor
A holder of an accepted bill may also endorse it — sign it over — to a third party, most commonly one of the holder's own creditors, in full or part settlement of a debt the holder owes that creditor. The bill's amount and due date remain completely unchanged; only the identity of the person entitled to receive payment on the due date changes.
In the books of the Drawer (Endorser), on endorsement:
| Particulars | Debit | Credit |
|---|---|---|
| Creditor's (Endorsee's) A/c ......Dr | Bill amount | |
| To Bills Receivable A/c | Bill amount |
This single entry simultaneously removes the Bills Receivable asset and settles the endorser's own debt to that creditor.
In the books of the Drawee (Acceptor) — exactly as with discounting, endorsement makes no difference whatsoever. The drawee's liability was fixed the moment the bill was accepted, and the drawee simply pays whoever presents the bill on the due date:
| Particulars | Debit | Credit |
|---|---|---|
| Bills Payable A/c ......Dr | Bill amount | |
| To Bank/Cash A/c | Bill amount |
The holder's signing-over of a bill to a third party (the endorsee), transferring the right to receive its payment, usually in settlement of a debt t …
The person to whom a bill is endorsed, who becomes entitled to present it for payment on the due date in place of …