Beruflich Dokumente
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BILLS OF EXCHANGE
BE is an instrument in writing containing an unconditional order signed by the
maker, directing a certain person to pay a certain sum of money only to or to the
order of a certain person or to the bearer of the instrument.
FEATURES:
1) A BE is a written order.
2) It is drawn and signed by the maker i.e. drawer of the bill.
3) It is an unconditional order to a person i.e. drawn to pay the specified
amount. The drawee must accept it to make it of value.
4) The specified amount is payable to the person named in the bill or to his
order or to the bearer.
5) It specifies the date by which the amount should be paid.
6) It is accepted by the drawee.
3 PARTIES TO BE
1) The DRAWER who makes or writes the BE.He is the person who has
granted credit to the person on whom the BE is drawn.
2) THE DRAWEE to whom the BE is drawn for his acceptance. He is the
person to whom the credit has been granted by the Drawer of BE.
3) THE PAYEE the person named in the BE to whom the amount is to be
paid.
TYPES OF BE
1) TRADE BILL where a BE is drawn and accepted for a trade transaction, it
is called TRADE BILL.
2) ACCOMODATION BILL where a BE is drawn and accepted for mutual
help, it is called ACCOMODATION BILL.
11th A/CS- BE
By Sameer Wadhwa
Prepared
ADVANTAGES OF A BE
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
1) MAKER
2) PAYEE
BASIS
11th A/CS- BE
By Sameer Wadhwa
BE
PN
Prepared
i)Drawer
It contains a promise to
pay.
It
does
acceptance
Drawee.
iii) Acceptance
iv) Parties
v)Liability
3 Parties
viii)Stamp
need
the
2 Parties
vii)Copies
not
by
11th A/CS- BE
By Sameer Wadhwa
Prepared
Prepared
d) If the maturity date falls on a day which is a public holiday the maturity
date of the bill shall be preceding business day.
12) DISHONOUR OF BILL means that the bill is not paid by the Drawee on its
due date.
13) NOTARY PUBLIC AND NOTING CHARGES Notary Public is an officer
appointed by the Central or State GOVT. to exercise the power and
functions relating to noting and protesting of negotiable instruments for
dishonour.Noting authenticates the fact of dishonour.
14) NOTING CHARGES is the fee paid to the Notary Public for noting and
protesting the BE of its honour.
15) RENEWAL OF BILL When the acceptor of a bill is not a position to meet
the bill on due date, he may, with the consent of the holder accept a fresh bill
in place of the old bill , it is called Renewal of Bill.
16) RETIREMENT OF BILL When the Drawee pays the bill before its due
date,it is called Retirement of Bill.The holder allows him a rebate of certain
amount calculatedat a certain rate per cent per annum,from the date of
retirement to date of maturity.
17) HOLDER of a negotiable instrument (BE, PN or Cheque) is a person
entitled in his own name to the possession thereof and to receive or recover
the amount due thereon from the parties to it.
18) HOLDER IN DUE COURSE- A person who acquires the negotiable
instrument (BE,PN or Cheque) in good faith,for value and before the date of
maturity is a holder in due course.The main advantage of being in such a
position is that he acquires a good title even if the title of the transferor was
defective.
ACCOUNTING TREATMENT OF BE OR PN
DRAWING, ACCEPTANCE AND PAYMENT OF BILL:
When a party gives a Bill of exchange, it is considered that he has discharged
its debt.The party which receives the BE credits the amount of the party giving
it; a new type of asset called Bills Receivable comes into existence.The party
11th A/CS- BE
By Sameer Wadhwa
Prepared
which gives the debists the account of the receiver and treats the bills as a new
type of liability called Bills Payable.
Entries in the Books of Drawer
1) For Sale of Goods on Credit :
Customer / Debtor A/C
- - - - - - -Dr
To sales A/C
2) On Drawing ,Accepting and Receipt of the Bill :
Bill Receivable A/C
- - - - - - - Dr
To Customer/Debtor A/C
Entries in the Books of the Drawee or Acceptor/Debtor
1) For Purchase of Goods on Credit :
Purchase A/C
To Supplier/Creditor A/C
2) When Acceptance on Bill is given :
Supplier/Creditor A/C
To Bills Payable A/C
3) On Payment of the Bill at Maturity :
Bills Payable A/C
To Cash/Bank A/C
- - - - - - - Dr
- - - - - - - -Dr
- - - - - - - -Dr
1) When the Bill is retained till the date of Maturity The drawer recieves the
money from the drawee on the due date.
Cash/Bank A/C
- - - - - - - - Dr (With the amount of the Bill)
To Bills Recievable A/C
2) When the Bill is discounted with the Bank
a) Entries in Drawers Books or the Books of person receiving the Bill
When the holder of the Bill takes amount from a Bank against the Bill before
the due date, it is known as Discounting of the Bill.The bank charges an
amount termed as Discounting Charges.
11th A/CS- BE
By Sameer Wadhwa
Prepared
Accounting Entry
When Bill is discounted and Cash is received or credited to Bank A/C:
Cash or Bank A/C
- - - - - -- Dr (The amt. of bill less discount)
Discounting Charges A/C
- - - - - - - Dr (The discount charged by Bank)
To Bills Recievable A/C
(The full amount of the Bill)
b) Drawees Books The acceptor or drawee is not affected by discounting of
the bill and therefore does not make any entry in his books in this regard.He
will pay it to the holder of the bill (whosoever he may be) on maturity.
Bills Payable A/C
- - - - - - - - -Dr
To Cash/Bank A/C
3) When a Bill is Endorsed or Negotiated in favour of a Creditor
When the holder of a bill transfers the bill to a 3 rd party, the bill is said to
have been endorsed or negotiated.The person who endorses the instrument
(bill) is called Endorser.The person to whom the instrument (bill) is endorsed
is called the Endorsee.
Drawers Books or Person Receiving the Bill
Creditors A/C
- - - - - - - - - - Dr
To B/R A/C
Creditors A/C is debited because a liability has been paid and B/R A/C is
credited because B/R has been endorsed.
As on the date of maturity, the payment will be received by the
endorsee.Hence, at the time of payment, the Endorser does not pass any
entry in his books.
Acceptors Books No entry regarding Endorsement .He will pay the
amount on the due date to the holder of the bill and record the following
entry.
Bills Payable A/C
- - - - - - - - Dr
To Cash/Bank A/C
Endorsees Books
11th A/CS- BE
By Sameer Wadhwa
Prepared
4) When the Bill is sent to the Bank for collection The persons receiving the
BE, may retain the Bill till maturity date and receive the amount as per the
Bill.But in order to ensure safety,he may send it to his bank with instructions
that the Bill be retained and released on its due date.It means bank will
retain the bill in safe custody and present it for payment on the due date.If
the bill is sent to the bank with such instructions, it is known as Bill Sent for
Collection.
The drawee will not pass any entry in his books for the bills sent for
collection.He will pass the entries in his books in the usual manner when he
makes the payment, no matter whether the payment is made to the drawer or
his bank or an Endorsee.
Dishonour of a Bill means a situation when the acceptor of the bill refuses
or is unable to pay the amount.The holder of the bill may present the bill
through a Notary Public and get the dishonour of the bill dated.
1)
2)
3)
4)
i)
ii)
11
th
Drawers Books
When the Bill is retained by the Drawer till Maturity and Dishonoured on due
date :
Drawee A/C
- - - - - - - Dr
To Bills Recievable A/C
(The amount of the bill)
To Cash/ Bank A/C
(Noting Charges)
When the Bill is discounted with bank and is Dishonoured , the entry will be
A/CS- BE
By Sameer Wadhwa
Prepared
Drawee A/C
To Cash/Bank A/C
- - - - - - - Dr
(The amt of Bill & Noting Charges)
iii)
iv)
When the Bill has been sent to the Bank for collection and is Dishonoured :
Drawee A/C
- - - - - - - - -Dr
To Bills sent for collection A/C
(Amt of Bill)
To Cash/Bank A/C
(Amt of Noting Charges, if any)
When a Bill is sent to the bank for collection and is dishonoured, the bank
returns the bill to the Drawer and the Drawee himself pays the noting
charges.
NOTE: In all the circumstances Drawee or Acceptor is debited to cancel
the credit given to him at the time of acceptance of the bill.
Drawees Books If the bill is dishonoured, the liability to the creditor
concerned will be restored.In addition to the amount of the bill,noting
charges ,if paid, for getting the bill noted, will also be payable to the creditor
.Therefore his account should be credited with the amount of the bill plus
the noting charges,if any.
Bills Payable A/C
- - - - - - - -Dr (Amt of the Bill)
Noting Charges A/C
- - - - - - - - - Dr (Noting Charges, if any)
To creditor (Drawer)
(Amt of the bill plus noting charges)
RENEWAL OF CHARGES Sometimes, an acceptor expresses his
inability to meet the bill on the due date and request the holder, or the
drawer, to substitute the old bill with a new one.If the Drawer agrees, the old
bill is cancelled and a new bill is drawn and of course accepted by the
drawee.This process is called Renewal Of Bill.
No noting required.The drawer will charge interest for the extension of
time.The amount of interest may be paid in cash or included in the amount
of the new bill.
Transactions
11th A/CS- BE
By Sameer Wadhwa
Drawers Books
Drawee Books
Prepared
Drawee A/C
- - - - - - Dr
To Bills Receivable A/C
Drawee A/C
- - - - - -Dr
To Interest A/C
Interest A/C
- - - - - - Dr
To Drawer A/C
Drawer A/C
To B/P A/C
- - - - - - Dr
Prepared
Basis
Trade Bills
Accomodation Bills
1) Nature
2) Consideration
There
is
a
definite The acceptor may not
consideration for which receive consideration for
the bill is accepted.
his acceptance.
3) Extension
of Credit
4) Proceeds
5) Recovery
11th A/CS- BE
By Sameer Wadhwa
Prepared