Book-Keeping and Accountancy · Ch 7 — Bills of Exchange
Sending the Bill for Collection through the Bank
Sending the Bill for Collection through the Bank
A holder may also use the bank purely as an agent for collection — asking the bank to present the bill to the drawee on the due date and collect the money on the holder's behalf, for a small collection charge. Unlike discounting, this is not a sale of the bill; the holder remains its owner throughout, and the bank merely acts as the holder's collecting agent.
In the books of the Drawer, when the bill is sent for collection:
| Particulars | Debit | Credit |
|---|---|---|
| Bills Sent for Collection A/c ......Dr | Bill amount | |
| To Bills Receivable A/c | Bill amount |
On the due date, once the bank collects the amount and credits the drawer's account net of its charges:
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c ......Dr | Net amount collected | |
| Bank Charges A/c ......Dr | Collection charges | |
| To Bills Sent for Collection A/c | Full bill amount |
In the books of the Drawee (Acceptor) — once again unaffected; the drawee simply pays the bank, which presents the bill on the holder's behalf, exactly as in the 'retain till maturity' case:
| Particulars | Debit | Credit |
|---|---|---|
| Bills Payable A/c ......Dr | Bill amount | |
| To Bank A/c | Bill amount |
An accepted bill handed to a bank purely as a collecting agent (not sold or discounted); the holder remains the legal owner of the bill until the bank ac …
The fee a bank charges for presenting a bill and collecting its amount on the holder's behalf, debited as an expense when the bank's colle …