Accountancy · Ch 4 — Accounting for Bills of Exchange

In the Books of Acceptor/Promisor

4.7.2

In the books of the acceptor (or the maker of a promissory note), the entries are the

same whatever the drawer does with the bill — whether he retains, discounts, endorses or

pledges it:

Occasion	Journal Entry
On accepting the bill	Creditor's A/c Dr.; To Bills Payable A/c
On maturity	Bills Payable A/c Dr.; To Bank A/c

The complete set of entries in the books of both the drawer and the acceptor, under all four

cases, is summarised below.

Case 1 — Drawer retains the bill till maturity and collects it directly

Transaction	Books of Creditor/Drawer	Books of Debtor/Acceptor
Sale/Purchase of goods	Debtor's A/c Dr.; To Sales A/c	Purchases A/c Dr.; To Creditor's A/c
Receiving/Accepting the bill	Bills Receivable A/c Dr.; To Debtor's A/c	Creditor's A/c Dr.; To Bills Payable A/c
Collection of the bill	Cash/Bank A/c Dr.; To Bills Receivable A/c	Bills Payable A/c Dr.; To Cash/Bank A/c

Case 2 — Bill sent to the bank for collection a few days before maturity

Transaction	Books of Creditor/Drawer	Books of Debtor/Acceptor
Sale/Purchase of goods	Debtor's A/c Dr.; To Sales A/c	Purchases A/c Dr.; To Creditor's A/c
Receiving/Accepting the bill	Bills Receivable A/c Dr.; To Debtor's A/c	Creditor's A/c Dr.; To Bills Payable A/c
Sending the bill for collection	Bills Sent for Collection A/c Dr.; To Bills Receivable A/c	No entry
On receiving the bank's advice	Bank A/c Dr.; To Bills Sent for Collection A/c	Bills Payable A/c Dr.; To Bank A/c

Case 3 — Drawer gets the bill discounted from the bank

Transaction	Books of Creditor/Drawer	Books of Debtor/Acceptor
Sale/Purchase of goods	Debtor's A/c Dr.; To Sales A/c	Purchases A/c Dr.; To Creditor's A/c
Receiving/Accepting the bill	Bills Receivable A/c Dr.; To Debtor's A/c	Creditor's A/c Dr.; To Bills Payable A/c
Discounting the bill	Bank A/c Dr. and Discount A/c Dr.; To Bills Receivable A/c	No entry
On maturity	No entry	Bills Payable A/c Dr.; To Bank A/c

Case 4 — Drawer endorses the bill in favour of his creditor

Transaction	Books of Creditor/Drawer	Books of Debtor/Acceptor
Sale/Purchase of goods	Debtor's A/c Dr.; To Sales A/c	Purchases A/c Dr.; To Creditor's A/c