Recording Transactions of Bill of Exchange:
For the purpose of accounting, bills are classified under two heads:
A bill of exchange is treated as a bill receivable by one who is entitled to receive the sum due on it. When we draw a bill or receive it by endorsement from our debtors, it is our bill receivable (B/R) and on maturity of such bill if it is held up to that time, we shall receive specified amount from the acceptor.
A bills payable is regarded as bill payable by one who has to pay it on the due date. When we accept a bill and thereby become liable to pay on its maturity, it is our bill payable (B/P).
It means the same bill is a bill receivable to one party and a bill payable to the other.
The accounting aspect of a bill of exchange can be divided into following parts:
When a bill is drawn, accepted and discharged.
When the drawer discounted it with the bank
When the drawer sends it for collection to the banker.
When the drawer endorses it to a third party
When a bill is dishonored.
When a bill is renewed for another period of time.
When a bill is retired.
When there is an accommodation bill (including the insolvency of one of the parties).
You may also be interested in other articles from “accounting for bills of exchange page” chapter:
- Definition and Explanation of Bill of Exchange
- Advantages of a Bills of Exchange
- How a Bill of Exchange Functions
- Promissory Note
- Difference between Bill of Exchange and Promissory Note
- Difference Between Bill of Exchange and Cheque/Check
- Recording Transactions of Bill of Exchange
- Drawing, Acceptance, and Payment of Bill of Exchange
- Discounting of Bill of Exchange
- Bills of Exchange for Collection
- Endorsement of a Bill of Exchange
- Dishonour of a Bill of Exchange
- Renewal of a Bill of Exchange
- Retiring of a Bill of Exchange
- Accommodation Bill of Exchange
- Insolvency of the Acceptor in a Bill of Exchange
Other Related Accounting Articles: