Book-Keeping and Accountancy · Ch 7 — Bills of Exchange
Retirement of a Bill under Rebate
Retirement of a Bill under Rebate
The opposite situation to renewal is retirement — here, the drawee wants to pay the bill before its due date, not after. If the drawer agrees to accept early payment, it is fair for the drawer to allow the drawee a small rebate (discount) for the unexpired period, since the drawee is giving up the money sooner than the bill legally required.
In the books of the Drawer, on retirement:
| Particulars | Debit | Credit |
|---|---|---|
| Bank/Cash A/c ......Dr | Amount actually received | |
| Rebate A/c ......Dr | Rebate allowed | |
| To Bills Receivable A/c | Full bill amount |
In the books of the Drawee (Acceptor), on retirement:
| Particulars | Debit | Credit |
|---|---|---|
| Bills Payable A/c ......Dr | Full bill amount | |
| To Bank/Cash A/c | Amount actually paid | |
| To Rebate A/c | Rebate received |
Early payment of a bill by the drawee, before its due date, with the drawer's consent, usually in exchange for a rebate for …
The discount a drawer allows a drawee for retiring (paying) a bill before its due date, calculated on the bill amount for the unexpired period at an agreed rate — an expense to the dr …